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Playing 'Hard to Get': An Economic Rationale for Crowding Out of Intrinsically Motivated Behavior

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  • Schnedler, Wendelin
  • Vanberg, Christoph

Abstract

Anecdotal, empirical, and experimental evidence suggests that offering extrinsic rewards for certain activities can reduce people's willingness to engage in those activities voluntarily. We propose a simple rationale for this 'crowding out' phenomenon, using standard economic arguments. The central idea is that the potential to earn rewards in return for an activity may create incentives to play 'hard to get' in an effort to increase those rewards. We discuss two specic contexts in which such incentives arise. In the first, refraining from the activity causes others to attach higher value to it because it becomes scarce. In the second, restraint serves to conceal the actor's intrinsic motivation. In both cases, not engaging in the activity causes others to offer larger rewards. Our theory yields the testable prediction that such effects are likely to occur when a motivated actor enjoys a sufficient degree of 'market power.'

Suggested Citation

  • Schnedler, Wendelin & Vanberg, Christoph, 2014. "Playing 'Hard to Get': An Economic Rationale for Crowding Out of Intrinsically Motivated Behavior," Working Papers 0559, University of Heidelberg, Department of Economics.
  • Handle: RePEc:awi:wpaper:0559
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    References listed on IDEAS

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    1. Friebel, Guido & Schnedler, Wendelin, 2011. "Team governance: Empowerment or hierarchical control," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1-2), pages 1-13, April.
    2. Gächter, Simon & Kessler, Esther & Königstein, Manfred, 2011. "The Roles of Incentives and Voluntary Cooperation for Contractual Compliance," IZA Discussion Papers 5774, Institute of Labor Economics (IZA).
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    4. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    5. Wendelin Schnedler & Radovan Vadovic, 2011. "Legitimacy of Control," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(4), pages 985-1009, December.
    6. Martin L. Weitzman, 1980. "The "Ratchet Principle" and Performance Incentives," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 302-308, Spring.
    7. Seabright, Paul, 2004. "Continuous Preferences Can Cause Discontinuous Choices: An Application to the Impact of Incentives on Altruism," CEPR Discussion Papers 4322, C.E.P.R. Discussion Papers.
    8. Roland Bénabou & Jean Tirole, 2011. "Identity, Morals, and Taboos: Beliefs as Assets," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 805-855.
    9. von Siemens, Ferdinand A., 2013. "Intention-based reciprocity and the hidden costs of control," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 55-65.
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    11. Michael Kosfeld & Armin Falk, 2006. "The Hidden Costs of Control," American Economic Review, American Economic Association, vol. 96(5), pages 1611-1630, December.
    12. Wendelin Schnedler, 2007. "You Don't Always Get What You Pay For," Working Papers 0452, University of Heidelberg, Department of Economics, revised Sep 2007.
    13. S. Bowles & S. Polania-Reyes., 2013. "Economic Incentives and Social Preferences: Substitutes or Complements?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
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    Cited by:

    1. Arcand, Jean-Louis & Wagner, Natascha, 2016. "Does Community-Driven Development Improve Inclusiveness in Peasant Organizations? – Evidence from Senegal," World Development, Elsevier, vol. 78(C), pages 105-124.
    2. Müller, Stephan & Rau, Holger A., 2018. "Motivational crowding out effects in charitable giving: Experimental evidence," Center for European, Governance and Economic Development Research Discussion Papers 338, University of Goettingen, Department of Economics.

    More about this item

    Keywords

    intrinsic motivation; crowding out; behavioral economics; market power; hidden information;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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