Download This PaperA Behavioral Explanation of the Relative Performance Evaluation Puzzle
15 Pages Posted: 15 Nov 2002
Date Written: November 13, 2002
Abstract
We study the effects of competitive preferences, where Chief Executive Officers (CEOs) compare their wage to the wage of other CEOs within the same industry, and derive utility from being ahead of them. We show that such social concerns work in the direction of CEO wages being positively correlated, in contrast to the Relative Performance Evaluation hypothesis, but consistent with several empirical studies.
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