Incentive Design in the Presence of Social Preferences

Project summary

The standard economic model has, until recently, ignored the fact that social preferences, including fairness, reciprocity, identity and peer effects, affect worker behavior in the workplace. Project B05 will examine the effects of diverse human resource management (HRM) practices—such as incentive pay, screening for traits, or team based work organization—on worker productivity and thereby firm competitiveness, while explicitly considering that workers may be motivated by social preferences, too. In so doing, it addresses a central objective of the CRC: to examine how deviations from the standard model impact firms’ optimal labor and organizational design policies.