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Incentives for Motivated Agents under an Administrative Constraint

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  • Miltiadis Makris

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

Abstract

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.

Suggested Citation

  • Miltiadis Makris, 2006. "Incentives for Motivated Agents under an Administrative Constraint," Discussion Papers 0601, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:0601
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    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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