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Pride and Prejudice: The Human Side of Incentive Theory

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  • Ellingsen, Tore
  • Johannesson, Magnus

Abstract

Many people are sensitive to social esteem, and their pride is a source of pro--social behavior. We present a game-theoretic model in which sensitivity to esteem varies across players and may depend on context as well players' beliefs about their opponents. For example, the pride associated with a generous image is greater when the player holding the image is in fact generous and believes the observers to be generous as well. The model can account both for the fact that players' behaviour sometimes depends on the opponents' unchosen options and for the prevalence of small symbolic gifts. Perhaps most importantly, the model offers an explanation for motivational crowding out: Control systems and pecuniary incentives may erode morale by signalling to the agent that the principal is not worth impressing.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5768.

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Date of creation: Jul 2006
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Handle: RePEc:cpr:ceprdp:5768

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Keywords: esteem; framing; incentives; motivational crowding out; social preferences;

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  1. Bénabou, Roland & Tirole, Jean, 2003. "Incentives and Prosocial Behavior," IDEI Working Papers 389, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jan 2006.
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  4. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, University of Chicago Press, vol. 29(1), pages 1-17, January.
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  12. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  13. Ernst Fehr & John List, 2004. "The hidden costs and returns of incentives - trust and trustworthiness among ceos," Artefactual Field Experiments 00044, The Field Experiments Website.
  14. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough Or Don'T Pay At All," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(3), pages 791-810, August.
  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. Pillutla, Madan M. & Chen, Xiao-Ping, 1999. "Social Norms and Cooperation in Social Dilemmas: The Effects of Context and Feedback, , ," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 78(2), pages 81-103, May.
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  18. Julio J. Rotemberg, 2006. "Minimally acceptable altruism and the ultimatum game," Working Papers, Federal Reserve Bank of Boston 06-12, Federal Reserve Bank of Boston.
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