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Legitimacy and incentives in a hierarchical relationship

Abstract : The general purpose of our thesis is, on the one hand, to study the influence of legitimacy of the manager on the motivation of his employee to exert effort and, on the other hand, to analyze how the manager integrates this potential influence into his behavior in order to bolster his authority. Finally, we are interested in strategies that the firm can design to bolster the legitimacy of its managers by choosing between several procedures of selection. Our approach is both theoretical, based on game theory, and empirical using experimental economics.First, we define a procedural legitimacy that consists in considering an executive as legitimate if he was promoted through a competition with no unfair treatment. Then, we define a meritocratic legitimacy that is the ability to master the operational task exerted by the employee. Finally, we define an aristocratic legitimacy, which is the ability of an individual to master managerial tasks.In a first chapter, we show that the future leader's effort during the competition is not necessarily a good way to bolster a procedural legitimacy because a very strong performance can just betray the fact that he has benefited from an advantage. Moreover, we show that the loser of the competition will always be a "bad loser" because his belief that he was disadvantaged during the competition will always be reinforced if he behaves with Bayesian rationality. The stake for the firm is then to delegate to an external entity the management of the selection of leaders to ensure that any unfair treatment presupposed during the competition does not provide any information regarding a potential unfair treatment in the future. In a second chapter, we show that to select on managerial abilities allows to increase the salary of executives even though these skills are less difficult to master. The reason is that it neutralizes the problems of rivalry between employees and executives and thus preserves the self-confidence of the one who has failed to be promoted (thus making it less costly to incentivize). The third chapter is an experimental work that aims to show that a meritocratic procedure incites the losers to actually ask for higher wage to compensate their discouragements following their failure.
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Submitted on : Friday, January 31, 2020 - 12:01:01 PM
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Émilien Prost. Legitimacy and incentives in a hierarchical relationship. Economics and Finance. Université de Lorraine, 2019. English. ⟨NNT : 2019LORR0121⟩. ⟨tel-02462407⟩



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