Presented By: Department of Economics
Incentivizing Autonomous Workers
Erik Madsen, New York University
Workers in many jobs enjoy significant autonomy regarding the projects or assignments they take on, sometimes leading to the neglect of tasks which are important to an employer but unattractive to workers. We study the joint use of monetary and career incentives to correct this problem. Optimal incentives always involve at least some misallocation of career opportunities to underperforming employees who take on an undesirable task. Bonuses may be used when the desired incentive power is sufficiently high, but the optimal bonus is generally non-monotone in the strength of incentives and may be zero when incentives are very strong. This non-monotonicity is driven by a novel group-size effect, which increases the effective incentive power of career rewards as the fraction of employees undertaking an under-served task grows.
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