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Pride and Prejudice: The Human Side of Incentive Theory

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  • Tore Ellingsen
  • Magnus Johannesson

Abstract

Desire for social esteem is a source of prosocial behavior. We develop a model in which actors' utility of esteem depends on the audience. In a principal agent setting, we show that the model can account for motivational crowding out. Control systems and pecuniary incentives erode morale by signaling to the agent that the principal is not worth impressing. The model also offers an explanation for why agents are motivated by unconditionally high pay and by mission-oriented principals.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.98.3.990
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 3 (June)
Pages: 990-1008

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Handle: RePEc:aea:aecrev:v:98:y:2008:i:3:p:990-1008

Note: DOI: 10.1257/aer.98.3.990
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  15. Mellström, Carl & Johannesson, Magnus, 2005. "Crowding Out in Blood Donation: Was Titmuss Right?," Working Papers in Economics 180, University of Gothenburg, Department of Economics, revised 08 Feb 2008.
  16. Seabright, Paul, 2004. "Continuous Preferences Can Cause Discontinuous Choices: An Application to the Impact of Incentives on Altruism," CEPR Discussion Papers 4322, C.E.P.R. Discussion Papers.
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