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2019/2020  KAN-CCMVV1730U  Incentives in Organizations: Theory and Experimental Evidence

English Title
Incentives in Organizations: Theory and Experimental Evidence

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration One Quarter
Start time of the course First Quarter
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Orsola Garofalo - Department of Strategy and Innovation (SI)
Main academic disciplines
  • Economics
Teaching methods
  • Face-to-face teaching
Last updated on 11-02-2019

Relevant links

Learning objectives
At the end of the course students should be able to:
  • Explain core theories of motivation from economics and psychology;
  • Assess the relevance of economic and psychological factors on motivation, performance and turnout.
  • Analyze optimal reward schemes to foster individual intrinsic motivation at work, from both a theoretical and an empirical perspectives;
  • Critically evaluate the most important empirical and experimental insights in this field from the main findings and implications;
  • Formulate and operationalize a research question related to incentives in organizations, for which one or more of the experimental methods introduced in the course is suitable.
  • Select experimental designs that are appropriate for analyzing a specific research question.
Incentives in Organizations: Theory and Experimental Evidence:
Exam ECTS 7,5
Examination form Oral exam based on written product

In order to participate in the oral exam, the written product must be handed in before the oral exam; by the set deadline. The grade is based on an overall assessment of the written product and the individual oral performance.
Individual or group exam Oral group exam based on written group product
Number of people in the group 2-4
Size of written product Max. 10 pages
Definition of number of pages:
Groups of 2 students max. 5 pages
Groups of 3-4 students max. 10 pages
Assignment type Synopsis
Written product to be submitted on specified date and time.
15 min. per student, including examiners' discussion of grade, and informing plus explaining the grade
Grading scale 7-point grading scale
Examiner(s) Internal examiner and second internal examiner
Exam period Autumn
Make-up exam/re-exam
Same examination form as the ordinary exam
if a student is absent from the oral exam due to documented illness but has handed in the written group product she/he does not have to submit a new product for the re-take.
* if a whole group fails the oral exam they must hand in a revised product for the re-take.
* if one student in the group fails the oral exam the course coordinator chooses whether the student will have the oral
Course content, structure and pedagogical approach

One of the most important challenges of firm owners is to motivate firm managers to behave in line with firm value maximization. Managers, in turn, face the challenge to motivate their employees to work hard and do the right things. This is often a challenge, because managers and employees typically have conflicting objectives, and the performance of employees is not always easy to measure. How should performance be measured and what are the most efficient incentives to enhance employees’ and executives’ motivation? Economics is a powerful tool to analyze conflicts of interest between managers and employees (or owners and managers), evaluate the consequences of such conflicts, and explore the optimal design of incentives. This course covers important principles of incentives in organizations. We will discuss crucial issues and possible solutions for improving the effectiveness of work (e.g. by improving coordination in organizations; by designing optimal reward-structures for both employees and executives, and tournament compensation systems) as well as the experience and behavior of people at work (e.g., by improving the well-being of individuals in organizations, their intrinsic motivation to work hard and correctly and by mitigating the temptations of unethical behaviors). We will explore the effects of rewards and performance-related pay on individual performance and behavior in the workplace; the causes and the consequences of employees’ and executives’ turnover; the determinants and effects of unethical behaviors in organizations. We will also discuss possible gender issues in organizations and gender differences in performance and motivation.  


The aim of this course is twofold: (1) to get familiar with various core concepts, theories, empirical and experimental applications within the field of economics of organization; (2)  to be able to apply these concepts to every-day organizational phenomena within firms. The focus of the applications will be on human resource management (motivating and rewarding of both employees and execu-tives) and corporate control.

Description of the teaching methods
The teaching of this course will be based on a variety of learning methods including lectures, group and class discussions, as well as final group presentations in class.

The group presentation is a presentation and discussion in class of an experimental design based on a research question.The professors provide a research question and the students have to be able to develop an experimental design. The students will need to demonstrate an understanding of the strengths and shortcomings of the experimental methods they present.
Feedback during the teaching period
Feedback on work and topics covered in the course is given during lectures, and also during the group presentations, where a high level of student-teacher interaction will be guaranteed. Finally, students are encouraged to use office hours for feedback.
Student workload
Preparation 100 hours
Exam 66 hours
Teaching 40 hours
Expected literature

Textbook: There is no formal textbook for the course.


However, students may find useful to look at the following books:

-          Gneezy U. and List J.A. “The why axis: Hidden Motives and the Undiscovered Economics of Everyday Life”

-          Friedman D. and Cassar A. “Economics Lab: An Intensive Course in Experimental Economics” Routledge.

-          Fréchette G.R. and Schotter A. Handbook of Experimental Economic Methodology, Oxford University Press.

-          Tirole J. “The theory of corporate finance”

-          Milgrom P. and Roberts J. “Economics, Organization, and Management” Prentice-Hall, Inc.

Last updated on 11-02-2019