The Pygmalion and Galatea Effects: An Agency Model with Reference-Dependent Preferences and Applications to Self-Fulfilling Prophecy
AbstractWe attempt to formulate and explain two types of self-fulfilling prophecy, called the Pygmalion effect (if a supervisor thinks her subordinates will succeed, they are more likely to succeed) and the Galatea effect (if a person thinks he will succeed, he is more likely to succeed). To this purpose, we extend a simple agency model with moral hazard and limited liability by introducing a model of reference-dependent preferences (RDP) by K˝oszegi and Rabin (2004). We show that the agent with high expectations about his performance can be induced to choose high effort with low-powered incentives. We then argue that the principal’s expectation has an important role as an equilibrium selection device.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 35.
Length: 37 pages
Date of creation: Sep 2007
Date of revision: Sep 2007
Contact details of provider:
Postal: 1-155 Uegahara Ichiban-cho, Nishinomiya, Hyogo 662-8501
Web page: http://www-econ.kwansei.ac.jp/~econ/index_e.html
More information through EDIRC
Self-fulfilling prophecy; Pygmalion effect; Galatea effect; referencedependent preferences; agency model; moral hazard;
Find related papers by JEL classification:
- B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executive Compensation
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Kohei Daido & Takeshi Murooka, 2013. "Loss Aversion, Stochastic Compensation, and Team Incentives," Discussion Paper Series 107, School of Economics, Kwansei Gakuin University, revised Jul 2013.
- Joaquín Gómez Miñambres, 2011. "Make it challenging : motivation through goal setting," Economics Working Papers we1123, Universidad Carlos III, Departamento de Economía.
- Fabian Herweg & Daniel Muller & Philipp Weinschenk, 2010.
"Binary Payment Schemes: Moral Hazard and Loss Aversion,"
American Economic Review,
American Economic Association, vol. 100(5), pages 2451-77, December.
- Fabian Herweg & Daniel Müller & Philipp Weinschenk, 2010. "Binary Payment Schemes: Moral Hazard and Loss Aversion," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_38, Max Planck Institute for Research on Collective Goods.
- Fabian Herweg & Daniel Müller & Philipp Weinschenk, 2008. "The Optimality of Simple Contracts: Moral Hazard and Loss Aversion," Bonn Econ Discussion Papers bgse17_2008, University of Bonn, Germany.
- Kohei Daido & Kimiyuki Morita & Takeshi Murooka & Hiromasa Ogawa, 2013. "Task Assignment under Agent Loss Aversion," Discussion Paper Series 103, School of Economics, Kwansei Gakuin University, revised Mar 2013.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Toshihiro Okada).
If references are entirely missing, you can add them using this form.