We show that if agents are risk neutral, prizes outperform wages if and only if there is sufficient pride and envy relative to the noisiness of performance. If agents are risk averse, prizes are a necessary supplement to wages (as bonuses).
Abstract
We show that if agents are risk neutral, prizes outperform wages if and only if there is suļ¬icient pride and envy relative to the noisiness of performance. If agents are risk averse, prizes are a necessary supplement to wages (as bonuses).