Rank Uncertainty in Organizations

S-Tier
Journal: American Economic Review
Year: 2021
Volume: 111
Issue: 3
Pages: 757-86

Authors (3)

Marina Halac (Yale University) Elliot Lipnowski (not in RePEc) Daniel Rappoport (not in RePEc)

Score contribution per author:

2.681 = (α=2.01 / 3 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

A principal incentivizes a team of agents to work by privately offering them bonuses contingent on team success. We study the principal's optimal incentive scheme that implements work as a unique equilibrium. This scheme leverages rank uncertainty to address strategic uncertainty. Each agent is informed only of a ranking distribution and his own bonus, the latter making work dominant provided that higher-rank agents work. If agents are symmetric, their bonuses are identical. Thus, discrimination is strictly suboptimal, in sharp contrast with the case of public contracts (Winter 2004). We characterize how agents' ranking and compensation vary with asymmetric effort costs.

Technical Details

RePEc Handle
repec:aea:aecrev:v:111:y:2021:i:3:p:757-86
Journal Field
General
Author Count
3
Added to Database
2026-01-25