Group versus Individual Performance Pay in Relational Employment Contracts when Workers are Envious

摘要: I compare group to individual performance pay when workers are envious and is nonverifiable. Avoiding payoff inequity, the reward scheme optimal as long firm faces no credibility problem. The may, however, become superior albeit introducing prospect of unequal pay. This due two reasons: Group incentives relatively low-powered compared incentives, requiring higher incentive impeding firm. Moreover, with rewards, benefits from incentive-strengthening effect envy, allowing for yet smaller overall further softening constraint. also show that contracts combining both rewards often optimal, depending on firm's These include joint relative schemes.