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Intinsically Motivated Agents: Blessing or Curse for Firms ?

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  • Ester Manna

Abstract

I investigate whether the presence of intrinsically motivated agents benefits firms in a competitiveenvironment. I find that firms may obtain higher profits by hiring self-interested agents than byhiring motivated agents. This is because the agents’ intrinsic motivation has counteracting effectson the profits obtained by the firms. On the one hand, motivation has a positive impact on theprofits due to a reduction of wages. Motivated employees provide a given level of quality for a lowerwage. On the other hand, motivation has a negative impact on each firm’s profits. The agents’intrinsic motivation has a positive impact on the quality offered by the firms. With higher quality,the degree of differentiation of the products is relatively less important, increasing competition andreducing prices. Firms find themselves trapped in a prisoner’s dilemma in which the strategy ofhiring self-interested agents is strictly dominated by that of hiring motivated agents. Hence, thevery presence of motivated agents may hurt firms.

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  • Ester Manna, 2013. "Intinsically Motivated Agents: Blessing or Curse for Firms ?," Working Papers ECARES ECARES 2013-37, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/149507
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    Cited by:

    1. Manna, Ester, 2013. "Mixed Duopoly with Motivated Teachers," MPRA Paper 52041, University Library of Munich, Germany.

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    More about this item

    Keywords

    spatial competition; intrinsically motivated agents; prisoner's dilemma;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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