IDEAS home Printed from https://ideas.repec.org/a/gam/jmathe/v8y2020i7p1194-d387475.html
   My bibliography  Save this article

Can Citizens Affect the Performance of Their Elected Representatives? A Principal–Agent Model of Strategic Interaction in Democratic Systems

Author

Listed:
  • Giuseppe Lanza

    (Department of Economics, University of Messina, Piazza Pugliatti 1, 98122 Messina, Italy)

  • Dario Maimone Ansaldo Patti

    (Department of Economics, University of Messina, Piazza Pugliatti 1, 98122 Messina, Italy)

  • Pietro Navarra

    (Department of Economics, University of Messina, Piazza Pugliatti 1, 98122 Messina, Italy)

Abstract

According to standard economic theory, human beings are expected to work more and better when benefits in the form of lower costs or higher reward increase. Principal–agent theory applied to the theory of the firm relies on this relationship and states that employees should be paid according to how well they perform their tasks. In this framework, monitoring devices are introduced to control employees’ performance and determine salaries. In this paper we construct a principal–agent model to describe the relationship between citizens/voters and elected representatives in which monitoring devices are introduced to control the performance of the latter. We demonstrate that tighter controls may produce better performance but also may produce a reduction in the intrinsic motivations of elected representatives, resulting in a reduction of their work effort. These results are interpreted in the light of the motivation crowding theory.

Suggested Citation

  • Giuseppe Lanza & Dario Maimone Ansaldo Patti & Pietro Navarra, 2020. "Can Citizens Affect the Performance of Their Elected Representatives? A Principal–Agent Model of Strategic Interaction in Democratic Systems," Mathematics, MDPI, vol. 8(7), pages 1-14, July.
    • Handle: RePEc:gam:jmathe:v:8:y:2020:i:7:p:1194-:d:387475
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7390/8/7/1194/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7390/8/7/1194/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
    2. Torsten Persson & Guido Tabellini & Francesco Trebbi, 2003. "Electoral Rules and Corruption," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 958-989, June.
    3. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    4. Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 191-210, Fall.
    5. Myerson Roger B., 1993. "Effectiveness of Electoral Systems for Reducing Government Corruption: A Game-Theoretic Analysis," Games and Economic Behavior, Elsevier, vol. 5(1), pages 118-132, January.
    6. Dickinson, David & Villeval, Marie-Claire, 2008. "Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories," Games and Economic Behavior, Elsevier, vol. 63(1), pages 56-76, May.
    7. Bruno S. Frey, 1997. "Not Just for the Money," Books, Edward Elgar Publishing, number 1183.
    8. Robert Gibbons, 1998. "Incentives in Organizations," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 115-132, Fall.
    9. Barry Weingast, 1984. "The congressional-bureaucratic system: a principal agent perspective (with applications to the SEC)," Public Choice, Springer, vol. 44(1), pages 147-191, January.
    10. Agnès Festré & Pierre Garrouste, 2015. "Theory And Evidence In Psychology And Economics About Motivation Crowding Out: A Possible Convergence?," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 339-356, April.
    11. David E. M. Sappington, 1991. "Incentives in Principal-Agent Relationships," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 45-66, Spring.
    12. Roger B. Myerson, 2000. "Economic Analysis of Constitutions," Discussion Papers 1291, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    13. Ram Mudambi & Pietro Maria Navarra & Giuseppe Sobbrio, 2001. "Rules, Choice and Strategy," Books, Edward Elgar Publishing, number 2312.
    14. Barry Mitnick, 1975. "The theory of agency," Public Choice, Springer, vol. 24(1), pages 27-42, December.
    15. Friedel Bolle & Philipp E. Otto, 2010. "A Price Is a Signal: on Intrinsic Motivation, Crowding‐out, and Crowding‐in," Kyklos, Wiley Blackwell, vol. 63(1), pages 9-22, February.
    16. Bohnet, Iris & Frey, Bruno S. & Huck, Steffen, 2001. "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," American Political Science Review, Cambridge University Press, vol. 95(1), pages 131-144, March.
    17. Bruno S. Frey & Reto Jegen, 2001. "Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    18. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 489-520.
    19. Frey, Bruno S., 1993. "Shirking or work morale? : The impact of regulating," European Economic Review, Elsevier, vol. 37(8), pages 1523-1532, December.
    20. Michele Limosani & Dario Maimone & Ansaldo Patti & Pietro Navarra, 2003. "Il rapporto di agenzia tra elettori ed eletti e gli effetti di Mani pulite sulle decisioni di politica economica locale," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2003(5).
    21. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-952, October.
    22. Bruno S. Frey, 1992. "Tertium Datur: Pricing, Regulating and Intrinsic Motivation," Kyklos, Wiley Blackwell, vol. 45(2), pages 161-184, May.
    23. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    24. Fabian Homberg & Joyce Costello, 2019. "Public Service Motivation and Civic Engagement," Springer Books, Springer, number 978-3-030-02453-6, September.
    25. Frey, Bruno S., 1993. "Motivation as a limit to pricing," Journal of Economic Psychology, Elsevier, vol. 14(4), pages 635-664, December.
    26. Bruno S. Frey, 1994. "How Intrinsic Motivation is Crowded out and in," Rationality and Society, , vol. 6(3), pages 334-352, July.
    27. Frey, Bruno S, 1997. "A Constitution for Knaves Crowds Out Civic Virtues," Economic Journal, Royal Economic Society, vol. 107(443), pages 1043-1053, July.
    28. Ronald A. Dye, 1986. "Optimal Monitoring Policies in Agencies," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 339-350, Autumn.
    29. David Dickinson & Marie Claire Villeval, 2008. "Does Monitoring Decrease Work Effort?," Post-Print halshs-00276284, HAL.
    30. Michael Kosfeld & Armin Falk, 2006. "The Hidden Costs of Control," American Economic Review, American Economic Association, vol. 96(5), pages 1611-1630, December.
    31. Chang, Juin-jen & Lai, Ching-chong, 1999. "Carrots or sticks? A social custom viewpoint on worker effort," European Journal of Political Economy, Elsevier, vol. 15(2), pages 297-310, June.
    32. Frey, Bruno S, 1993. "Does Monitoring Increase Work Effort? The Rivalry with Trust and Loyalty," Economic Inquiry, Western Economic Association International, vol. 31(4), pages 663-670, October.
    33. Mitnick, Barry M., 1981. "The strategic uses of regulation -- And deregulation," Business Horizons, Elsevier, vol. 24(2), pages 71-83.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ezzine-de-Blas, Driss & Corbera, Esteve & Lapeyre, Renaud, 2019. "Payments for Environmental Services and Motivation Crowding: Towards a Conceptual Framework," Ecological Economics, Elsevier, vol. 156(C), pages 434-443.
    2. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series 2734, CESifo.
    3. Samuel Bowles & Sandra Polania-Reyes, 2011. "Economic incentives and social preferences: substitutes or complements?," Department of Economics University of Siena 617, Department of Economics, University of Siena.
    4. Dickinson, David & Villeval, Marie-Claire, 2008. "Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories," Games and Economic Behavior, Elsevier, vol. 63(1), pages 56-76, May.
    5. Agnès Festré & Pierre Garrouste, 2015. "Theory And Evidence In Psychology And Economics About Motivation Crowding Out: A Possible Convergence?," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 339-356, April.
    6. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," UMASS Amherst Economics Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics.
    7. Bruno Frey, 2017. "Policy consequences of pay-for-performance and crowding-out," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 1(1), pages 55-59, February.
    8. Bowles, Samuel & Hwang, Sung-Ha, 2008. "Social preferences and public economics: Mechanism design when social preferences depend on incentives," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1811-1820, August.
    9. Marco Faillo & Costanza Piovanelli, 2017. "Wage delegation and intrinsic motivation: an experimental study," CEEL Working Papers 1701, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    10. Michèle Belot & Marina Schröder, 2016. "The Spillover Effects of Monitoring: A Field Experiment," Management Science, INFORMS, vol. 62(1), pages 37-45, January.
    11. Kajackaite, Agne & Werner, Peter, 2015. "The incentive effects of performance requirements – A real effort experiment," Journal of Economic Psychology, Elsevier, vol. 49(C), pages 84-94.
    12. Seeun JUNG, 2014. "Risk Attitudes and Shirking on the Quality of Work under Monitoring: Evidence from a Real-Effort Task Experiment," THEMA Working Papers 2014-26, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    13. Seeun Jung & Kenneth Houngbedji, 2014. "Shirking, Monitoring, and Risk Aversion," Working Papers halshs-00965532, HAL.
    14. Pedersen, Line Bjørnskov & Andersen, Merethe Kirstine Kousgaard & Jensen, Ulrich Thy & Waldorff, Frans Boch & Jacobsen, Christian Bøtcher, 2018. "Can external interventions crowd in intrinsic motivation? A cluster randomised field experiment on mandatory accreditation of general practice in Denmark," Social Science & Medicine, Elsevier, vol. 211(C), pages 224-233.
    15. Kirsten Bregn, 2013. "Detrimental Effects of Performance-Related Pay in the Public Sector? On the Need for a Broader Theoretical Perspective," Public Organization Review, Springer, vol. 13(1), pages 21-35, March.
    16. Andrej Angelovski & Daniela Cagno & Daniela Grieco & Werner Güth, 2019. "Trusting versus monitoring: an experiment of endogenous institutional choices," Evolutionary and Institutional Economics Review, Springer, vol. 16(2), pages 329-355, December.
    17. Lindeboom, Maarten & van der Klaauw, Bas & Vriend, Sandra, 2015. "The effect of audit regimes on applications for long-term care," CEPR Discussion Papers 10572, C.E.P.R. Discussion Papers.
    18. Andrei Bremzen & Elena Khokhlova & Anton Suvorov & Jeroen van de Ven, 2015. "Bad News: An Experimental Study on the Informational Effects Of Rewards," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 55-70, March.
    19. Dominguez-Martinez, Silvia & Sloof, Randolph & von Siemens, Ferdinand A., 2014. "Monitored by your friends, not your foes: Strategic ignorance and the delegation of real authority," Games and Economic Behavior, Elsevier, vol. 85(C), pages 289-305.
    20. Michael Kosfeld & Armin Falk, 2006. "The Hidden Costs of Control," American Economic Review, American Economic Association, vol. 96(5), pages 1611-1630, December.

    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:gam:jmathe:v:8:y:2020:i:7:p:1194-:d:387475. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.