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Incentive reversal

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Published
<mark>Journal publication date</mark>08/2009
<mark>Journal</mark>American Economic Journal: Microeconomics
Issue number2
Volume1
Number of pages15
Pages (from-to)133-147
Publication StatusPublished
<mark>Original language</mark>English

Abstract

By incentive reversal we refer to situations in which an increase in rewards for all agents results in fewer agents exerting effort. We show that externalities among peers may give rise to such intriguing situations even when all agents are fully rational. We provide a necessary and sufficient condition for the organizational technology so that it will be susceptible to incentive reversal. The condition implies that some degree of complementarity is enough to allow incentive reversal.