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Pride and Prejudice: The Human Side of Incentive Theory

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  • Ellingsen, Tore
  • Johannesson, Magnus

Abstract

Many people are sensitive to social esteem, and their pride is a source of pro--social behavior. We present a game-theoretic model in which sensitivity to esteem varies across players and may depend on context as well players' beliefs about their opponents. For example, the pride associated with a generous image is greater when the player holding the image is in fact generous and believes the observers to be generous as well. The model can account both for the fact that players' behaviour sometimes depends on the opponents' unchosen options and for the prevalence of small symbolic gifts. Perhaps most importantly, the model offers an explanation for motivational crowding out: Control systems and pecuniary incentives may erode morale by signalling to the agent that the principal is not worth impressing.

Suggested Citation

  • Ellingsen, Tore & Johannesson, Magnus, 2006. "Pride and Prejudice: The Human Side of Incentive Theory," CEPR Discussion Papers 5768, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5768
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    Keywords

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    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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