"Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm

Ramalingam, Abhijit (2009): "Endogenous" Relative Concerns: The Impact of Workers' Characteristics on Status and Pro ts in the Firm.

Abstract

This paper explores the rationality of status concerns amongst co-workers and the impact of such rational status concerns on a firm's profits. We find that it is individually rational for agents in a firm to develop and exhibit status concerns. Workers are, by their choices of status concerns, able to transfer surplus from the the rm to themselves. Further, relative concerns are shaped by the relative strengths and weaknesses of the workers in the firm. Finally, a firm's profit is reduced (relative to the benchmark moral-hazard model) by workers who exhibit such "endogenous" relative concerns.

• Item Type: MPRA Paper
• Language: English
• Keywords: status, incentives, endogenous preferences, surplus transfer, profits
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M51 - Firm Employment Decisions ; Promotions; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M52 - Compensation and Compensation Methods and Their Effects

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