Managing Wages: Fairness Norms of Low- and High-Performing Team Members

27 Pages Posted: 27 Jun 2019

See all articles by Martin Fochmann

Martin Fochmann

Free University of Berlin

Florian Sachs

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration

Joachim Weimann

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: June 26, 2019

Abstract

Services are often provided by groups. The question of remuneration arises both at the group level and for each individual group member. We examine the question of how relative pay should be designed within the group if all group members are to regard the payment scheme as fair. We use a three-step laboratory experiment to compare which fairness norms are chosen by high-performing and low-performing group members. It turns out that both types of group members prefer the performance pay principle. Support for equal pay is negligible. However, the low performers use their bargaining power to improve their position, but without deviating from the performance principle substantially. A random influence on the performance of the players does not change the results.

Keywords: Performance principle, fairness norms, relative remuneration

JEL Classification: C91, C92, D31, D90, J31, M52

Suggested Citation

Fochmann, Martin and Sachs, Florian and Weimann, Joachim, Managing Wages: Fairness Norms of Low- and High-Performing Team Members (June 26, 2019). Available at SSRN: https://ssrn.com/abstract=3410205 or http://dx.doi.org/10.2139/ssrn.3410205

Martin Fochmann (Contact Author)

Free University of Berlin ( email )

Thielallee 73
Accounting and Taxation
Berlin, 14195
Germany

Florian Sachs

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration ( email )

Universitaetsplatz 2
Magdeburg, 39016
Germany

Joachim Weimann

Otto-von-Guericke-Universität Magdeburg - Institute of Economics and Business Administration ( email )

Universitaetsplatz 2
Magdeburg, 39016
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
12
Abstract Views
244
PlumX Metrics