Please enter verification code
Studying on the Relation Between Ability Structure and Incentive Structure Based on a Game Model
Journal of Investment and Management
Volume 5, Issue 6, December 2016, Pages: 93-98
Received: Sep. 4, 2016; Accepted: Sep. 22, 2016; Published: Oct. 14, 2016
Views 2763      Downloads 137
Zhang Chaoxiao, School of Management, Sichuan University of Science & Engineering, Zigong, China
Article Tools
Follow on us
A game model is designed to analyze the relation between employee’s ability structure and enterprise’s incentive structure. And some factors’ impaction on incentive structure is analyzed, such as employee’s ability, risk aversion, output error, and product price. The intrinsic mechanism of employee classification according to their ability level is also analyzed. The result reveals that under competitive working environment employee’s ability level should be kept consistent, employee with different ability levels can’t be classified by themselves, and piece rates should be kept direct ratio to employee’s ability level and product’s market trend. Although strict balanced incentive structure comprises of fixed wage and prize or promotion, balanced conditions can not usually be satisfied in real situation, so that fixed wage, piece rate wage, and prize or promotion should be combined to form a suitable proportion structure. Prize or promotion mechanism will strengthen the steepness degree of incentive structure, which will strengthen incentive effect under the condition of employee’s participation restriction.
Ability Structure, Incentive Structure, Game Model
To cite this article
Zhang Chaoxiao, Studying on the Relation Between Ability Structure and Incentive Structure Based on a Game Model, Journal of Investment and Management. Vol. 5, No. 6, 2016, pp. 93-98. doi: 10.11648/j.jim.20160506.11
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License ( which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Edward P. Lazear (2000), “The Power of Incentives,” The American Economic Review, 90, 410-414.
Jed Devaro (2006),“Strategic Promotion Tournaments and Worker Performance,”Strategic Management Journal,27, 721-740.
Peter Wright, Mark Kroll, Jeffrey A. Krug and Michael Pettus (2007), “Influences of Top Management Team Incentives on Firm Risk Taking,” Strategic Management Journal, 28, 81-89.
Edward P. Lazear, Sharwin Rosen (1981), “Rank-order Tournaments as Optimum Labor Contracts,” Journal of Political Economy, 89, 841-864.
Edward P. Lazear (1986), “Salaries and Piece Rates,” The Journal of Business, 59, 405-432.
Malcomson, James M. (1984), “Work Incentives, Hierarchy, and Internal Labor Markets,” The Journal of Political Economy, 92, 486-507.
Holmstrom,B., Ricard I Costa (1986), “Managerial Incentives and Capital Management,” Quarterly Journal of Economics, 101, 403-460.
Holmstrom, B., P. Milgrom (1987), “Aggregation and Linearity in the Provision of Intertemporal Incentives”. Econometrica, 55, 303-328.
Fudengerg, D.,B. Holmstrom,P. Milgrom (1990), “Short-term Contracts and Long-term Agency Relationship,” Journal of Economic Theory, 51, 1-31.
Eward P. Lazear (2000), “Performance Pay and Productivity,” The American Economic Review, 90, 1346-1362.
Claudia M. Van Der Heijde, Beatrice I. J. M. Van Der Heijden (2006), “A Competence-Based and Multidimensional Operationalization and Measurement of Employability,” Human Resource Management, 45, 449–476.
Michael S. Weisbach (2006), “Optimal Executive Compensation Vs. Managerial Power,” NBER Working Paper.
Loch, C. H., and Y. Wu (2008), “Social Preferences and Supply Chain Performance: An Experimental Study, Management Science, 54 (11), 1835-1849.
Dreber, A., Fudenberg, D., and Rand, D. G. (2014), "Who Cooperates in Re-peated Games: The Role of Altruism, Inequity Aversion, and Demographics."Journal of Economic Behavior & Organization, 98, 41-55.
Bowles, S., and S. Polania-Reyes (2012), “Economic Incentives and Social Preferences: Substitutes or Complements?”, Journal of Economic Literature, 50 (2), 368-425.
Koszegi, B.(2014), "Behavioral Contract Theory." Journal of Economic Literature, 52 (4), 1075-1118.
Kidd, M., A. Nicholas and B. Rai (2013), “Tournament outcomes and pro-socialbehavior”, Journal of Economic Psychology 39, 387.401.
Erkal, N., L. Gangadharan, and N. Nikiforakis (2011), “Relative Earnings and Giving in a Real-Effort Experiment”, American Economic Review, 101 (3), 3330-3348.
Rey-Biel, P., R. Sheremeta and N. Uler (2012),“(Bad) Luck or (Lack of) Effort?Sharing Rules in the US and Europe”, Working Paper.
Riyanto, Y. and J. Zhang (2013), “The impact of social comparison of ability onpro-social behavior”, The Journal of Socio-Economics, 47, 37-46.
Dal Bó, P. and G. R. Fréchette (2011).“The Evolution of Cooperation in Infinitely Repeated Games: Experimental Evidence”, The American Economic Review, 101 (1), 411-429.
Dal Bó, P. and G. R. Fréchette (2014), “On the Determinants of Cooperation inInfinitely Repeated Games: A Survey”, SSRN 2535963.
Fudenberg, D., Rand, D. G., and A. Dreber (2012), “Slow to Anger and Fast toForgive: Cooperation in an Uncertain World”, American Economic Review, 102 (2), 720-49.
Pablo Hernandez, Dylan Minor Dana Sisak (2015), “Do People Who Care About OthersCooperate More? ExperimentalEvidence from Relative Incentive Pay”, SSRN 2669665.
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
Tel: (001)347-983-5186