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Intrinsically Motivated Agents: Blessing or Curse for Firms?

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  • Ester Manna

Abstract

I investigate whether the presence of intrinsically motivated agents benefits firms in a competitive environment. I find that firms may obtain higher profits by hiring self-interested agents than by hiring motivated agents. This is because the agents' intrinsic motivation has counteracting effects on the profits obtained by the firms. On the one hand, motivation has a positive impact on the profits due to a reduction of wages. Motivated employees provide a given level of quality for a lower wage. On the other hand, motivation has a negative impact on each firm's profits. The agents' intrinsic motivation has a positive impact on the quality offered by the firms. With higher quality, the degree of differentiation of the products is relatively less important, increasing competition and reducing prices. Firms find themselves trapped in a prisoner's dilemma in which the strategy of hiring self-interested agents is strictly dominated by that of hiring motivated agents. Hence, the very presence of motivated agents may hurt firms.

Suggested Citation

  • Ester Manna, 2013. "Intrinsically Motivated Agents: Blessing or Curse for Firms?," 2013 Papers pma1910, Job Market Papers.
  • Handle: RePEc:jmp:jm2013:pma1910
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    References listed on IDEAS

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    1. Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, vol. 78(3), pages 275-299, November.
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    6. Benjamin E. Hermalin, 1994. "Heterogeneity in Organizational Form: Why Otherwise Identical Firms Choose Different Incentives for Their Managers," RAND Journal of Economics, The RAND Corporation, pages 518-537.
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    Cited by:

    1. Manna, Ester, 2013. "Mixed Duopoly with Motivated Teachers," MPRA Paper 52041, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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