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Competition and incentives with motivated agents

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  • Besley, Tim
  • Ghatak, Maitreesh

Abstract

A unifying theme in the literature on organizations such as public bureaucracies and private non-profits is the importance of missions, as opposed to profit, as an organizational goal. Such mission-oriented organizations are frequently staffed by motivated agents who subscribe to the mission. This paper studies incentives in such contexts and emphazises the role of matching principals' and agents' mission preferences in increasing organizational efficiency. Matching economizes on the need for high-powered incentives. However, it can also entrench bureaucratic conservatism and resistance to innovations. The framework developed in this paper is applied to school competition, incentives in the public sector and in private nonprofits, and the interdependence of incentives and productivity between the private for-profit sector and the mission-oriented sector through occupational choice.
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Suggested Citation

  • Besley, Tim & Ghatak, Maitreesh, 2005. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 928, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:928
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    File URL: http://eprints.lse.ac.uk/928/
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    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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