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The Erosion and Sustainability of Norms and Morale

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  • 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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Bibliographic Info

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
Date of revision:
Handle: RePEc:tky:fseres:2002cf169

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  1. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  2. Isaac, R. Mark & McCue, Kenneth F. & Plott, Charles R., . "Public Goods Provision in an Experimental Environment," Working Papers 428, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. V. Crawford, 2010. "Adaptive Dynamics in Coordination Games," Levine's Working Paper Archive 404, David K. Levine.
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  5. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  6. Sobel, Joel, 2000. "A Model of Declining Standards," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 295-303, May.
  7. Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
  8. Lindbeck, Assar & Nyberg, Sten & Weibull, Jörgen W., 1997. "Social Norms and Economic Incentives in the Welfare State," Working Paper Series 476, Research Institute of Industrial Economics.
  9. Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December.
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Cited by:
  1. Jakub Steiner, 2006. "Strong Enforcement by a Weak Authority," ESE Discussion Papers 149, Edinburgh School of Economics, University of Edinburgh.
  2. Charles Figuieres & David Masclet & Marc Willinger, 2011. "Weak moral motivation leads to the decline of voluntary contributions," CIRANO Working Papers 2011s-09, CIRANO.
  3. Sandner, Kai, 2008. "Balancing Performance Measures When Agents Behave Competitively in an Environment With Technological Interdependencies," Discussion Papers in Business Administration 2113, University of Munich, Munich School of Management.

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