A Bonus Given: Noise, Effort and Efficiency in a Flat Hierarchy

John G. Sessions, John D Skatun

Research output: Contribution to journalArticle

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Abstract

We demonstrate that bonus payment schemes in firms with flat hierarchies are optimal when workers are homogenous and effort is unobservable. Whereas noisy environments generate less effort, firms compensate for this by offering higher bonuses to ensure efficiency. Policies that reduce bonuses in the financial sector may have to be implemented at a cost to efficiency.
Original languageEnglish
Pages (from-to)2527-2532
Number of pages6
JournalEconomics Bulletin
Volume39
Issue number4
Early online date12 Nov 2019
Publication statusPublished - 2019

Keywords

  • bonuses
  • banks

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