Prizes versus Wages with Envy and Pride

Abstract

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).

Keywords: Envy, Pride, Wages, Prizes, Bonus

JEL Classiﬁcation: C72, D01, D23, L14

Document
Control
Number(s)

CFDP 1835

Author(s)

John Geanakoplos & Ori Haimanko

Page Count

Publication Date

October 2005

JEL
Classification
Codes

C72, D01, D23, L14