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Incentives for Motivated Agents under an Administrative Constraint

  • Miltiadis Makris

    (Department of Economics, University of Exeter and CMPO, University of Bristol)

Consider an agent who has an expertise in producing a non-marketable good. This good is valued by a single principal, and there is a veri able measure of the agent's performance. Crucially, the agent is intrinsically motivated, due to `warm glow altruism'. In addition, the agent's budget, which is controlled by the principal, must not be less than the monetary performance-cost faced by the agent. This gives rise to a limited-liability constraint. It also restricts the agent's ability to under-report costs. In such environment, we determine the link between the agent's budget and performance. Our results come in contrast to the received solution of the principal-agent problem, and to most in the literature on mission-motivated organisations and public services provision.

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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP0601.pdf
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Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 0601.

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Date of creation: Feb 2006
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Handle: RePEc:exe:wpaper:0601
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