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Zaki Wahhaj, University of Kent Print
Friday, 19 October 2018, 12:15 - 13:15

Zaki Wahhaj, University of Kent

Guilt, Esteem and Motivational Investments

Abstract : In this paper we address the question what are the determinants of a firm’s investment in the loyalty and motivation of its employees? We develop a simple principal-agent model where the standard optimal contract is to offer a bonus that trades off incentive provision vs rent extraction. We allow the principal to undertake two types of investments - one that reduces the marginal cost of effort of the agent and the other that increases the on-the-job satisfaction. We characterize the relationship between these investments and the level of the bonus. We also characterize how varying the outside option of the agent affects these


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