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Incentives to Motivate

  • Kvaløy, Ola

    ()

    (UiS)

  • Schöttner, Anja

    ()

    (University of Bonn)

We present a model in which a motivator can take costly actions - or what we call motivational effort - in order to reduce the effort costs of a worker, and analyze the optimal combination of motivational effort and monetary incentives. We distinguish two cases. First, the firm owner chooses the intensity of motivation and bears the motivational costs. Second, another agent of the firm chooses the motivational actions and incurs the associated costs. In the latter case, the firm must not only incentivize the worker to work hard, but also the motivator to motivate the worker. We characterize and discuss the conditions under which monetary incentives and motivational effort are substitutes or complements, and show that motivational effort may exceed the efficient level.

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File URL: http://dl.dropbox.com/u/8078351/uis_wps_econ_fin/uis_wps_2012_15_kvaloy_schotter.pdf
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Paper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2012/15.

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Length: 47 pages
Date of creation: 17 Jul 2012
Date of revision:
Handle: RePEc:hhs:stavef:2012_015
Contact details of provider: Postal:
University of Stavanger, NO-4036 Stavanger, Norway

Web page: http://www.uis.no/research/economics_and_finance

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