Positive self-image and incentives in organisations

Research output: Contribution to journalArticlepeer-review

26 Citations (Scopus)

Abstract

This paper investigates the implications of workers' mistaken beliefs about their abilities on incentives in organisations. It shows that if effort is observable, then an agent's mistaken beliefs about his own ability are favourable to the principal. However, when effort is unobservable an agent's mistaken beliefs about his own ability can be either favourable or unfavourable to the principal. The article provides conditions under which an agent's overestimation about his own ability is favourable to the principal when effort is unobservable. The article shows that workers' mistaken beliefs about their co-workers' abilities make interdependent incentive schemes more attractive to firms than individualistic ones.

Original languageEnglish
Pages (from-to)1315-1332
Number of pages18
JournalThe Economic Journal
Volume118
Issue number531
DOIs
Publication statusPublished - 2008

Keywords

  • BIAS

Fingerprint

Dive into the research topics of 'Positive self-image and incentives in organisations'. Together they form a unique fingerprint.

Cite this