Luck in a Flat Hierarchy: Wages, bonuses and noise.

John Sessions; John Skatun

doi:10.1111/1475-4932.12701

Luck in a Flat Hierarchy: Wages, bonuses and noise.

John Sessions^* (Corresponding Author), John Skatun

^*Corresponding author for this work

Economics

Newcastle University

Research output: Contribution to journal › Article › peer-review

Abstract

We study bonuses in a flat hierarchy and find effort optimality to be violated a two worker-type model with noisy performance indicators. Dedicated workers extract informational rents from firms whilst slack worker effort is inefficiently low. Whilst increases in measurement noise reduce the supply-side effort effects of increasing bonuses. Our model helps to explain empirical observations that bonuses are more prevalent and larger in jobs with noisy environments, such as within the financial sector.

Original language	English
Pages (from-to)	373-391
Number of pages	19
Journal	The Economic Record
Volume	98
Issue number	323
Early online date	21 Oct 2022
DOIs	https://doi.org/10.1111/1475-4932.12701
Publication status	Published - 19 Dec 2022

Keywords

Bonuses
banks
informational rent

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10.1111/1475-4932.12701

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Skattun_etal_ER_Luck_In_A_AAM
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Cite this

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KW - informational rent

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Luck in a Flat Hierarchy: Wages, bonuses and noise.

Abstract

Keywords

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