IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v116y2015icp26-42.html
   My bibliography  Save this article

Incentives to motivate

Author

Listed:
  • Kvaløy, Ola
  • Schöttner, Anja

Abstract

We present a model in which a motivator can take costly actions – or what we call motivational effort – in order to reduce the effort costs of a worker, and analyze the optimal combination of motivational effort and monetary incentives. We distinguish two cases. First, the firm owner chooses the intensity of motivation and bears the motivational costs. Second, another agent of the firm chooses the motivational actions and incurs the associated costs. In the latter case, the firm must not only incentivize the worker to work hard, but also the motivator to motivate the worker. We characterize and discuss the conditions under which monetary incentives and motivational effort are substitutes or complements, and show that motivational effort may exceed the efficient level.

Suggested Citation

  • Kvaløy, Ola & Schöttner, Anja, 2015. "Incentives to motivate," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 26-42.
  • Handle: RePEc:eee:jeborg:v:116:y:2015:i:c:p:26-42
    DOI: 10.1016/j.jebo.2015.03.012
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268115000876
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Eric Van den Steen, 2005. "Organizational Beliefs and Managerial Vision," Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(1), pages 256-283, April.
    2. Kosfeld, Michael & Neckermann, Susanne & Yang, Xiaolan, 2014. "Knowing that You Matter, Matters! The Interplay of Meaning, Monetary Incentives, and Worker Recognition," IZA Discussion Papers 8055, Institute for the Study of Labor (IZA).
    3. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
    4. Rotemberg, Julio J & Saloner, Garth, 1994. "Benefits of Narrow Business Strategies," American Economic Review, American Economic Association, vol. 84(5), pages 1330-1349, December.
    5. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
    6. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    7. Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 82(3), pages 465-473.
    8. Mana Komai & Mark Stegeman & Benjamin E. Hermalin, 2007. "Leadership and Information," American Economic Review, American Economic Association, vol. 97(3), pages 944-947, June.
    9. Dur, Robert & Non, Arjan & Roelfsema, Hein, 2010. "Reciprocity and incentive pay in the workplace," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 676-686, August.
    10. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-636, May.
    11. Mana Komai & Mark Stegeman, 2010. "Leadership based on asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 35-63.
    12. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    13. Hermalin, Benjamin E, 1998. "Toward an Economic Theory of Leadership: Leading by Example," American Economic Review, American Economic Association, vol. 88(5), pages 1188-1206, December.
    14. Dur, Robert & Sol, Joeri, 2010. "Social interaction, co-worker altruism, and incentives," Games and Economic Behavior, Elsevier, vol. 69(2), pages 293-301, July.
    15. Anthony M. Marino & Ján Zábojník, 2008. "Work-related perks, agency problems, and optimal incentive contracts," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 565-585.
    16. Julio Rotemberg & Garth Saloner, 2000. "Visionaries, Managers, and Strategic Direction," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 693-716, Winter.
    17. Anja Schöttner & Veikko Thiele, 2010. "Promotion Tournaments and Individual Performance Pay," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(3), pages 699-731, September.
    18. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June.
    19. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    20. Kvaløy, Ola & Nieken, Petra & Schöttner, Anja, 2015. "Hidden benefits of reward: A field experiment on motivation and monetary incentives," European Economic Review, Elsevier, vol. 76(C), pages 188-199.
    21. Florian Ederer, 2010. "Feedback and Motivation in Dynamic Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(3), pages 733-769, September.
    22. Alessandro Lizzeri & Margaret A. Meyer & Nicola Persico, 2002. "The Incentive Effects of Interim Performance Evaluations," Penn CARESS Working Papers 592e9328faf6e775bf331e1c0, Penn Economics Department.
    23. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
    24. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
    25. Baldauf, Artur & Cravens, David W. & Grant, Kegn, 2002. "Consequences of sales management control in field sales organizations: a cross-national perspective," International Business Review, Elsevier, vol. 11(5), pages 577-609, October.
    26. Gürerk, Özgür & Irlenbusch, Bernd & Rockenbach, Bettina, 2009. "Motivating teammates: The leader's choice between positive and negative incentives," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 591-607, August.
    27. Julio J. Rotemberg & Garth Saloner, 1993. "Leadership Style and Incentives," Management Science, INFORMS, vol. 39(11), pages 1299-1318, November.
    28. Aoyagi, Masaki, 2010. "Information feedback in a dynamic tournament," Games and Economic Behavior, Elsevier, vol. 70(2), pages 242-260, November.
    29. Edward P. Lazear, 2010. "Leadership: A Personnel Economics Approach," NBER Working Papers 15918, National Bureau of Economic Research, Inc.
    30. Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
    31. Hermalin, Benjamin E., 2007. "Leading for the long term," Journal of Economic Behavior & Organization, Elsevier, vol. 62(1), pages 1-19, January.
    32. Lazear, Edward P., 2012. "Leadership: A personnel economics approach," Labour Economics, Elsevier, vol. 19(1), pages 92-101.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Monetary rewards; Non-monetary motivation; Leadership;

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:116:y:2015:i:c:p:26-42. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jebo .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.