Maurizio Caserta, Livio Ferrante, Francesco Reito
August 7, 2020
We present a simple principal-agent model with an employer and two types of employees/workers, low and high skilled. Low-skilled workers are envious of their high-skilled peers, and incur a disutility cost whenever the latter receive a positive surplus from their labor contract. We show that: i ) if the envy cost is relatively low (high), high-skilled workers obtain a payoff higher (lower) than that they receive when they are not envied; ii ) if the envy cost can be manipulated (increased or reduced), high-skilled workers can take actions of envy-provocation or envy-reduction to further increase their payoff.