Make it challenging : motivation through goal setting
AbstractWe study a principal agent model where agents derive a sense of pride when accomplishing production goals. As in classical models, the principal offers a pay-per-performance wage to the agent, determining the agent’s extrinsic incentives. However, in our setting, the principal does also want to set goals that affect the agents’ intrinsic motivation to work. Agents differ in their personal standard which determines what becomes challenging and rewarding to them, and hence the intensity of their intrinsic motivation to achieve goals. We show that, at the optimal contract, the agents’ production, as well as the goals set by the principal, increase with the agents’ personal standards. Thus, although goal setting is payoff irrelevant, since it does not directly affect agents’ wage, it increases agents’ achievement and hence the principal’s profits. Moreover, we show that a mediocre standard agent could end up being the most satisfied one
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1123.
Date of creation: Aug 2011
Date of revision:
Intrinsic motivation; Goal-setting; Reference dependent preference;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- M50 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - General
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-01 (All new papers)
- NEP-CBE-2011-10-01 (Cognitive & Behavioural Economics)
- NEP-CTA-2011-10-01 (Contract Theory & Applications)
- NEP-HRM-2011-10-01 (Human Capital & Human Resource Management)
- NEP-MIC-2011-10-01 (Microeconomics)
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