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Intrinsically 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 competitive environment. I find that firms may obtain higher profits by hiring self-interested agents than by hiring motivated agents. This is because the agents' intrinsic motivation has counteracting effects on the profits obtained by the firms. On the one hand, motivation has a positive impact on the profits due to a reduction of wages. Motivated employees provide a given level of quality for a lower wage. 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 and reducing prices. Firms find themselves trapped in a prisoner's dilemma in which the strategy of hiring self-interested agents is strictly dominated by that of hiring motivated agents. Hence, the very presence of motivated agents may hurt firms.

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Paper provided by Job Market Papers in its series 2013 Papers with number pma1910.

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Date of creation: 08 Oct 2013
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Handle: RePEc:jmp:jm2013:pma1910

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  1. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
  2. Maitreesh Ghatak & Hannes Mueller, 2009. "Thanks for Nothing? Not-for-Profits and Motivated Agents," STICERD - Economic Organisation and Public Policy Discussion Papers Series 014, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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  8. Avinash Dixit, 2002. "# Incentives and Organizations in the Public Sector: An Interpretative Review," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 696-727.
  9. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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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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