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When high-powered incentive contracts reduce performance: choking under pressure as a screening device
TLDR
In this paper, it was shown that high-powered incentives may reduce performance rather than improve it; a phenomenon referred to as choking under pressure, in which high ability workers choose high-power incentive contracts.Abstract:
Empirical and experimental papers find that high-powered incentives may reduce performance rather than improve it; a phenomenon referred to as choking under pressure. We show that competition for high ability workers nevertheless leads firms to offer high bonus payments, thereby deliberately accepting pressure-induced performance reductions. Bonus payments allow for a separating equilibrium in which only high ability workers choose high-powered incentive contracts. Low ability workers receive fixed payments and produce their maximum output which, however, is still below the reduced output of high ability workers. Bonus payments lead to a social loss which is increasing in the degree of competition. Our paper helps to explain why steep incentive schemes are persistent in highly-competitive industries such as investment banking, and why the observed performance sensitivity of CEO compensation is largely heterogeneous.read more
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Mobile banking and financial inclusion : the regulatory lessons
TL;DR: In this paper, a framework for considering the design of regulation of mobile banking is presented, where the authors discuss competition policy and interoperability issues that are discussed in the paper and show that mobile banking provides important lessons for financial regulation more generally in developed and developing economies.
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Constitutions, Regulations, and Taxes: Contradictions of Different Aspects of Decentralization
TL;DR: In this paper, different aspects of decentralization (fiscal decentralization, post-constitutional regulatory decentralization and constitutional decentralization) are confronted using a single dataset from the Russian Federation of the Yeltsin period as a politically asymmetric country.
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Performance Under Pressure in the NBA
TL;DR: The authors analyzed the effects of psychological pressure on performance using National Basketball Association (NBA) free throw data from the 2002-2003 through 2009-2010 seasons and found that players choke under pressure and shoot 5-10 percentage points worse than normal in the final seconds of very close games.
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Is it really different? Patterns of regionalisation in post-Soviet Central Asia
TL;DR: In this paper, the authors examined the prospects of regional economic integration in Central Asia from the point of view of the extent of actual economic interdependencies in the region, using a new and unique dataset.
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The Evolutionary Approach to Entropy: Reconciling Georgescu-Roegen's Natural Philosophy with the Maximum Entropy Framework
TL;DR: It is argued that the MaxEnt principle can be generalized into a framework of analyzing the evolution of functions under natural selection, if functions are equated with inference devices and observer relativity is function relativity.
References
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Journal ArticleDOI
Performance Pay and Top Management Incentives
Kevin Murphy,Michael C. Jensen +1 more
TL;DR: For example, the authors estimates of the pay-performance relation (including pay, options, stockholdings, and dismissal) for chief executive officers indicate that CEO wealth changes $3.25 for every $1,000 change in shareholder wealth.
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Performance pay and top-management incentives
Michael C. Jensen,Kevin Murphy +1 more
TL;DR: For example, the authors estimates of the pay-performance relation (including pay, options, stockholdings, and dismissal) for chief executive officers indicate that CEO wealth changes $3.25 for every $1,000 change in shareholder wealth.
Journal ArticleDOI
The Provision of Incentives in Firms
TL;DR: In this article, a review of existing work on the provision of incentives for workers is presented, and the authors evaluate this literature in the light of a growing empirical literature on compensation from two perspectives: first, an underlying assumption of this literature is that individuals respond to contracts that reward performance.
Journal ArticleDOI
Aggregation and linearity in the provision of intertemporal incentives
Bengt Holmstrom,Paul Milgrom +1 more
TL;DR: In this paper, the authors consider the problem of providing incentives over time for an agent with constant absolute risk aversion, and find that the optimal compensation scheme is a linear function of a vector of accounts which count the number of times that each of the N kinds of observable events occurs.