Money and Status: How Best to Incentivize Work

55 Pages Posted: 22 Feb 2017  

Pradeep K. Dubey

SUNY Stony Brook - Center for Game Theory in Economics

John Geanakoplos

Yale University - Cowles Foundation

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Date Written: February 13, 2017

Abstract

Status is greatly valued in the real world, yet it has not received much attention from economic theorists. We examine how the owner of a firm can best combine money and status to get her employees to work hard for the least total cost. We find that she should motivate workers of low skill mostly by status and high skill mostly by money. Moreover, she should do so by using a small number of titles and wage levels. This often results in star wages to the elite performers and, more generally, in wage jumps for small increases in productivity. By analogy, the governance of a society should pay special attention to the status concerns of ordinary citizens, which may often be accomplished by reinforcing suitable social norms.

Keywords: Status, Incentives, Wages

JEL Classification: C70, I20, I30, I33

Suggested Citation

Dubey, Pradeep K. and Geanakoplos, John, Money and Status: How Best to Incentivize Work (February 13, 2017). Cowles Foundation Discussion Paper No. 1954R2. Available at SSRN: https://ssrn.com/abstract=2921956

Pradeep K. Dubey

SUNY Stony Brook - Center for Game Theory in Economics ( email )

Stony Brook, NY 11794
United States
631-632-7555 (Phone)
631-632-7516 (Fax)

John D Geanakoplos (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3397 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://cowles.econ.yale.edu/P/au/d_gean.htm

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