Grepperud, Sverre () (Institute of Health Management and Health Economics) Pedersen, Pål Andreas (Bodø Graduate School of Business)
Abstract
This paper analyses optimal contracts in a principal-agent model where the agent is intrinsically motivated at the outset and there is an endogenous relationship between the structure of incentive payments and intrinsic motivation (crowding effects). The analysis shows that crowding effects have implications for the optimal contract and that under some conditions the principal can do better without implementing any economic incentives. Furthermore, it is shown that when high-powered incentives diminish intrinsic motivation (crowding-out) the first-best solution in a principal-agent framework is unattainable.
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Publisher Info
Paper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number
2001:4.
Length: 17 pages Date of creation: 30 Jun 2009 Date of revision: Handle: RePEc:hhs:oslohe:2001_004
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