Research On Performance Compensation Model Based On Loss Aversion And Loss Probability Aversion

In the process of production and operation of the enterprise,the purpose of the business owner is to obtain the maximum profit,and profit is inseparable from the hard work of the staff.How to effectively motivate the efforts of employees is the key to improve the production,ensure product quality,and further expand the market share,enhance the market competitiveness of enterprises.Therefore,it has important significance and great research value to design a scientific and efficient pay for performance incentive mechanism.Based on the principal-agent theory,considered the production relations that output is influenced by the agent's effort level and interference factors in the process of production,researched the pay for performance design problem between the principal with different behavior characteristics and the agent with different behavior characteristics under bounded rationality.Using the cumulative prospect theory,characterized the sense of the principal and the agent to profit under bounded rationality,and analyzed the behavior choice of the agent and the principal.The paper explains the influence of each factor on the behavior choice and the perceived value of the principal and agent by the way of illustration.This paper first studied the behavior choice and profit of the principal and agent under the full rational pay for performance model,and analyzed the influence of basic wage and production capacity of the enterprise on the agent(or principal)behavior and profit by the way of illustration.Then study the pay for performance model with loss aversion behavior,and analyzed the influence of each factor on the behavior choice and perceived value of the principal and agent after the bounded rationality behavior characteristics added.Finally added the probabilistic loss aversion behavior characteristics to the pay for performance model.Using prospect theory.Using cumulative prospect theory,analyzed the influence of each factor on the behavior choice and perceived value of the principal and agent after loss aversion behavior and probabilistic loss aversion behavior added with discontinuous decision weights function form.The results show that the behavior choice of the agent(optimal degree of effort choice)is affected by the production capacity of enterprises and the profit-sharing coefficient set by the principal and independent of their bounded rationality behavior characteristics.But their perceived value is affected by the bounded rationality behavior characteristics.The principal is different from the agent,their behavior choice of(set of profit-sharing coefficient)and perceived value are affected by the bounded rational behavior characteristics.