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Endogenous social comparisons and the internal organization of firms


Bartling, Björn (2012). Endogenous social comparisons and the internal organization of firms. Managerial And Decision Economics, 33(1):11-17.

Abstract

Should workers of a firm be organizationally integrated to realize benefits from benchmarking? Or should they be separated to preclude horizontal social comparisons? This paper highlights a trade-off that arises if social comparisons in firms are endogenous. We analyze a principal multi-agent model in which the principal trades off the reduction of agents' risk exposures by use of relative performance evaluation and the thereby induced social comparisons for which agents must be compensated. Contrary to standard theoretical predictions, relative performance evaluation is optimal only if the performance measures are sufficiently correlated relative to the agents' regard for others

Abstract

Should workers of a firm be organizationally integrated to realize benefits from benchmarking? Or should they be separated to preclude horizontal social comparisons? This paper highlights a trade-off that arises if social comparisons in firms are endogenous. We analyze a principal multi-agent model in which the principal trades off the reduction of agents' risk exposures by use of relative performance evaluation and the thereby induced social comparisons for which agents must be compensated. Contrary to standard theoretical predictions, relative performance evaluation is optimal only if the performance measures are sufficiently correlated relative to the agents' regard for others

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Date:12 January 2012
Deposited On:12 Jan 2012 16:24
Last Modified:09 Nov 2017 22:53
Publisher:Wiley-Blackwell
ISSN:0143-6570
Additional Information:This is the pre-peer reviewed version of the following article: Managerial and Decision Economics, Volume 33, Issue 1, pages 11–17, January 2012, which has been published in final form at DOI: 10.1002/mde.1555
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1002/mde.1555
Other Identification Number:merlin-id:3985

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