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Incentives and Anonymity Principle: Crowding Out Toward Users

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  • Patricia Crifo
  • Jean-Louis Rullière

Abstract

In our model, an agent produces an outcome by a costly effort and then distributes it among heterogeneous users. The agent’s payoff is the weighted sum of the users’ shares and the coefficient reflecting their heterogeneity. When the agent neglects users’ heterogeneity the game leads to an anonymous allocation. Otherwise, the equilibrium distribution is non- egalitarian but more efficient. Low performing agents reduce inequality among users by delivering an egalitarian service, while intermediate or high performing agents tend to prefer (but not always) delivering an unequal service, thereby breaking the anonymity principle. Incentives do matter regarding the crowding effect toward users.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1316.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1316

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Related research

Keywords: incentives; anonymity principle; egalitarian tasks allocation; principal agent user relationship; crowding-out effect;

References

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  1. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 414-418, May.
  2. Uri Gneezy & Aldo Rustichini, 2004. "Gender and competition at a young age," Framed Field Experiments 00151, The Field Experiments Website.
  3. Al Slivinski, 1999. "Team Incentives and Organizational Form," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9916, University of Western Ontario, Department of Economics.
  4. Sliwka, Dirk, 2003. "On the Hidden Costs of Incentive Schemes," IZA Discussion Papers 844, Institute for the Study of Labor (IZA).
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  6. George J. Borjas, 2002. "The Wage Structure and the Sorting of Workers into the Public Sector," NBER Working Papers 9313, National Bureau of Economic Research, Inc.
  7. Fehr, Ernst & Gächter, Simon, 2001. "Do Incentive Contracts Crowd Out Voluntary Cooperation?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3017, C.E.P.R. Discussion Papers.
  8. Bull, Clive & Schotter, Andrew & Weigelt, Keith, 1987. "Tournaments and Piece Rates: An Experimental Study," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(1), pages 1-33, February.
  9. Bruno S. Frey & Reto Jegen, 2000. "Motivation Crowding Theory: A Survey of Empirical Evidence," CESifo Working Paper Series 245, CESifo Group Munich.
  10. Bruce Shearer, 2004. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71(2), pages 513-534, 04.
  11. Frey, Bruno S & Oberholzer-Gee, Felix, 1997. "The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out," American Economic Review, American Economic Association, American Economic Association, vol. 87(4), pages 746-55, September.
  12. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
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