Incentive Reversal

Authors: 
Eyal Winter
Abstract: 

By incentive reversal we refer to situations in which an increase of rewards for all agents results in fewer agents exerting effort. We show that externalities among peers may give rise to such intriguing situations even when all agents are fully rational. We provide a necessary and sufficient condition on the organizational technology in order for it to be susceptible to incentive reversal. The condition implies that some degree of complementarity is enough to allow incentive reversal.

Date: 
February, 2009
Published in: 
Number: 
505