Template-Type: ReDIF-Paper 1.0
Title: Technology Choice and Incentives under Relative Performance Schemes 
Author-Name: Matthias Kräkel
Author-Email: m.kraekel@uni-bonn.de
Author-Name: Anja Schöttner
Classification-JEL: D82; D86; J33; M52
Keywords: complementarities; heterogeneous workers; production technology; tournament.
Abstract: We identify a new problem that may arise when heterogeneous
	workers are motivated by relative performance schemes: If workers’
	abilities and the production technology are complements, the firm
	may prefer not to adopt a more advanced technology even though
	this technology would costlessly increase each worker’s productivity.
	Due to the complementarity between ability and technology, under
	technology adoption the productivity of a more able worker increases
	more strongly than the productivity of a less able colleague, thereby
	reducing the motivation of both workers to exert effort under a relative
	incentive scheme. We show that this adverse incentive effect is
	dominant and, consequently, keeps the firm from introducing a better
	production technology if talent uncertainty is sufficiently high and/or
	monitoring of workers is sufficiently precise.
Note: 
Length: 25
Creation-Date: 2010-05
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse10_2010.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse10_2010