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![Example 5 with r σ 2 = 0.2, a H = 0.75 and K = [0.50, 0.74]. In the left panel, the effort distortion is non-monotonic in ability. In the right panel, the effort distortion rate is globally decreasing in ability](publication/352359972/figure/fig1/AS:1034057706131457@1623549977679/Example-5-with-r-s-2-02-a-H-075-and-K-050-074-In-the-left-panel-the.png)
Example 5 with r σ 2 = 0.2, a H = 0.75 and K = [0.50, 0.74]. In the left panel, the effort distortion is non-monotonic in ability. In the right panel, the effort distortion rate is globally decreasing in ability
Source publication
We generalize the disutility of effort function in the linear-Constant Absolute Risk Aversion (CARA) pure moral hazard model. We assume that agents are heterogeneous in ability. Each agent’s ability is observable and treated as a parameter that indexes the disutility of effort associated with the task performed. In opposition to the literature (the...
Context in source publication
Context 1
... rate to be strictly decreasing in ability is the specific form of additive separability of the marginal COE displayed in Proposition 5. For instance, Example 5 satisfies v ak vaa ,a (k, a) = −1 < 0 for all (a, k) ∈ A × K , but Proposition 5 can still be applied since its marginal COE is given by v a (k, a) = k + a 2 . The right panel of Fig. 3 illustrates how the effort-distortion rate is strictly decreasing in ability in Example 5 despite its non-monotonicity when measured in absolute values (instead of percentage ...
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Citations
This paper proposes that the ability to perform a task or take an action can be maximized by redirecting the “busy” ability of the individual using alternative incentives. The paper hypothesizes that an individual’s full ability to do something can be reached if suitable and favourable incentives are offered to the targeted individual to replace existing incentives that are holding part or all of the individual’s ability. The paper assumes that individuals spread their abilities to fulfil needs, wants, and desires using available incentives. This assumption means that an individual’s capacity to take an action can be maximized by offering suitable alternative incentives that are favourably perceived by the individual. These alternative incentives can release the busy part of the individual’s ability to take an action by replacing the individual’s current incentives that are limiting and/or holding the individual’s ability. This means that a customer’s ability to buy a product, or an employee’s ability to perform a task can be maximized by offering alternative favorable incentives to replace their current ones. The paper assumes that for every action, there has to be an incentive to reach, a motive to fulfil, and an ability to perform the action.