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Self-Confidence and Social Interactions

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  • R. Benabou
  • J. Tirole

Abstract

This paper studies the interactions between an individual self-steem and his social environment, whether in the workplace, at school, or in personal relationships. A person generally has only imperfect knowledge of his own ability (or long-term pay) in pursuing a task, and will undertake it only if he has succinct self-confidence. People who interact with him (parent, spouse, friend, teacher, manager, colleague, etc.) often have complementary information about his ability, but also a vested interest in his completing the task. This generates an incentive for such principals to distort their signals so as to manipulate the agent’s self-confidence. We first study situations where an informed principal chooses an incentive structure, such as offering payments or rewards, delegating a task, or simply giving encouragement. We show that rewards may be weak reinforcers in the short term and that, as stressed by psychologists, they may have hidden costs in that they become negative reinforcers once withdrawn. By offering a low–powered incentive scheme, the principal signals that she trusts the agent. Conversely, rewards (extrinsic motivation) have a limited impact on the agent’s current performance, and reduce his intrinsic motivation to undertake similar tasks in the future. Similarly, empowering the agent is likely to increase his motivation and effort, while offers of help or assistance may create dependence. More generally, we identify under which conditions the hidden costs of rewards are a myth or a reality. We then consider the fact that people often criticize or downplay the achievements of their spouse, child, colleague, coauthor, subordinate or teammate. We formalize such situations of ego–bashing, and argue that they may reflect battles for dominance. By lowering the other’s ego, an individual may gain (or regain) real authority within the relationship. Finally, we turn to the case where it is the agent who has superior information, and may attempt to s

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Bibliographic Info

Paper provided by Economics Department, Princeton University in its series Princeton Economic Theory Papers with number 00s2.

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Date of creation: Dec 1999
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Handle: RePEc:wop:prinet:00s2

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References

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  1. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
  2. Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Jean-Jacques Laffont & Jean Tirole, 1988. "Repeated Auctions of Incentive Contracts, Investment, and Bidding Parity with an Application to Takeovers," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 516-537, Winter.
  4. Benabou, R. & Tirole, J., 2000. "Self-Confidence: Intrapersonal Strategies," Papers 209, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  6. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  7. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-64, May.
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Cited by:
  1. Ernst Fehr, 2003. "Psychological Foundations of Incentives," Microeconomics 0305010, EconWPA.
  2. Bruno S. Frey & Reto Jegen, . "Motivation Crowding Theory: A Survey Of Empirical Evidence, Revised Version," IEW - Working Papers 049, Institute for Empirical Research in Economics - University of Zurich.
  3. Ernst Fehr & Simon Gaechter, . "Do Incentive Contracts Crowd out Voluntary Cooperation?," IEW - Working Papers 034, Institute for Empirical Research in Economics - University of Zurich.
  4. Sällström, Susanna & Sjogren, Anna, 2002. "Trapped, Delayed and Handicapped," CEPR Discussion Papers 3335, C.E.P.R. Discussion Papers.
  5. Aviad Heifetz & Yossi Spiegel, 2000. "On the Evolutionary Emergence of Optimism," Discussion Papers 1304, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Kritikos, Alexander S. & Tan, Jonathan H. W., 2005. "Indenture as a Commitment Device in Self-Enforced Contracts: An Experimental Test," Discussion Papers 241, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
  7. Neymotin, Florence, 2010. "Linking self-esteem with the tendency to engage in financial planning," Journal of Economic Psychology, Elsevier, vol. 31(6), pages 996-1007, December.
  8. Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2007. "The Dynamic Evolution of Preferences," Economic Theory, Springer, vol. 32(2), pages 251-286, August.
  9. Kunz, Alexis H. & Pfaff, Dieter, 2002. "Agency theory, performance evaluation, and the hypothetical construct of intrinsic motivation," Accounting, Organizations and Society, Elsevier, vol. 27(3), pages 275-295, April.

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