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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Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number
0102.
Length: Date of creation: Jan 2001 Date of revision: Handle: RePEc:ukc:ukcedp:0102
Contact details of provider: Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP Phone: +44 (0)1227 764000 Fax: +44 (0)1227 827850 Web page: http://www.ukc.ac.uk/economics/
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Find related papers by JEL classification: L0 - Industrial Organization - - General J0 - Labor and Demographic Economics - - General D2 - Microeconomics - - Production and Organizations
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