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Abstract
This study provides evidence from a laboratory experiment showing that managerial bonuses can affect adversely a manager’s subordinates. In our set up, managers compete to obtain a large bonus which depends partly on the effort exerted by their subordinates. Managers can suggest an effort level and coerce subordinates who disobey by punishing them. When managers compete for individual bonuses, we find that subordinates do not obey their demands. This doubles coercion rates relative to a control treatment without bonuses. In contrast, when managers compete for pooled bonuses which give managers discretionary power over the allocation of the bonus, most subordinates exert maximal effort. Although managers share a substantial fraction of the bonus, they are not worse off than they are with an individual bonus. A model in which agents care about inequality in earnings can account for the main findings in our experiment.
Dokumententyp: | Arbeitspapier |
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Name der Reihe: | Discussion Paper Series, University of Heidelberg, Department of Economics |
Band: | 0589 |
Ort der Veröffentlichung: | Heidelberg |
Erstellungsdatum: | 14 Apr. 2015 08:13 |
Erscheinungsjahr: | März 2015 |
Seitenanzahl: | 29 |
Institute/Einrichtungen: | Fakultät für Wirtschafts- und Sozialwissenschaften > Alfred-Weber Institut |
DDC-Sachgruppe: | 330 Wirtschaft |
Freie Schlagwörter: | coercion, managerial incentives, disobedience, hierarchy, tournament. |
Schriftenreihe: | Discussion Paper Series / University of Heidelberg, Department of Economics |