Competition and the Ratchet Effect

• 成果类型: Article
• 署名作者: Charness, Gary; Kuhn, Peter; Villeval, Marie Claire
• 署名单位: University of California System; University of California Santa Barbara; Centre National de la Recherche Scientifique (CNRS); Universite Lyon 2
• 刊物名称: JOURNAL OF LABOR ECONOMICS
• ISSN/ISSBN: 0734-306X
• DOI: 10.1086/659347
• 发表日期: 2011
• 页码: 513-547
• 关键词: performance pay; career concerns; incentives; MARKET; INFORMATION; INNOVATION; PRINCIPLE; DYNAMICS

摘要

In labor markets, the ratchet effect refers to a situation where workers subject to performance pay choose to restrict their output, because they rationally anticipate that firms will respond to higher output levels by raising output requirements or by cutting pay. We model this effect as a multiperiod principal-agent problem with hidden information and study its robustness to labor market competition both theoretically and experimentally. Consistent with our theoretical model, we observe substantial ratchet effects in the absence of competition, which are nearly eliminated when competition is introduced; this is true regardless of whether market conditions favor firms or workers.