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The Erosion and Sustainability of Norms and Morale

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Author Info
Michihiro Kandori (Faculty of Economics, University of Tokyo)
Abstract

The initially high performance of a socioeconomic organization is quite often subject to gradual erosion over time. We present a simple model which captures such a phenomenon. We assume that players are partly motivated by certain psychological factors, norms and morale, and they are willing to exert extra effort if others do so. This results in a "continuum" of equilibrium effort levels, whose minimum corresponds to the Nash equilibrium with respect to the material incentives. We show that repeated random shocks induce the erosion of equilibrium e ort levels, but they do not completely decay; in the long run a certain range of efforts are sustainable. Our model shows that different organizations typically enjoy diverse norms and morale, which persist for a long time, in the vicinity of the equilibrium determined by material incentives.

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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-169.

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Length: 29 pages
Date of creation: Sep 2002
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Handle: RePEc:tky:fseres:2002cf169

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  1. Lindbeck, Assar & Nyberg, Sten & Weibull, Jörgen W., 2002. "Social Norms and Welfare State Dynamics," Working Paper Series 585, Research Institute of Industrial Economics. [Downloadable!]
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  2. Hitoshi Matsushima, 2002. "Honesty-Proof Implementation," CIRJE F-Series CIRJE-F-178, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
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