Original scientific paper

FAIRNESS AND INCENTIVES IN RELATION-BASED SOCIETIES

Jincai Pi

Abstract

This paper mainly discusses the effects of fairness on incentives in relation-based societies
(e.g., China) through the principal-agent framework. Our analyses give the conditions under
which the consideration of fairness will decrease or increase the agent’s efficiency wage. At
the same time, our analyses give the conditions under which taking into account fairness will
make the principal’s constraint to incentivize the agent easier or harder to be satisfied. In a
word, this paper finds that the incentive effects of fairness are condition-dependent, and that
moral hazard problems are more subtle and difficult to be tackled when fairness is taken into
account.

Keywords

Fairness; Incentive; Principal-agent; Efficiency Wage

Hrčak ID:

70507

URI

https://hrcak.srce.hr/70507

Publication date:

1.6.2011.

Article data in other languages: croatian

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