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August 9, 2026GamesOpen Access

Efficient Favouritism with Status Incentives: A Moral-Hazard Game of Delegation and Recognition

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Authors

SBSwapnendu BanerjeeODOindrila DeySGSubhadip Ghosh

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Overview

Studies how status incentives impact organizational design and decision rights in a two-agent moral hazard framework.

Key Points

  • The aim is to explore how status incentives affect favouritism and fairness in delegation within organizations.
  • Utilized a two-agent moral hazard framework with limited liability.
  • Examined two regimes: favouritism with exclusive decision rights and fairness with shared rights.
  • Analyzed optimal regimes based on varying levels of status valuation.
  • Status incentives can make ex-post favouritism optimal even without ex-ante bias.
  • Interior inefficient favouritism can be eliminated when project returns are high enough.
  • The principal's optimal regime can show non-monotonic behavior in status, favoring either favouritism or fairness based on status valuation.

Cite This Study

Banerjee et al. (2026) studied this question.

synapsesocial.com/papers/6a782d3b2e1896536c8401e0https://doi.org/10.3390/g17040043
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