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Self-Confidence and Social Interactions

  • R. Benabou
  • J. Tirole

This paper studies the interactions between an individual self-steem and his social environment, whether in the workplace, at school, or in personal relationships. A person generally has only imperfect knowledge of his own ability (or long-term pay) in pursuing a task, and will undertake it only if he has succinct self-confidence. People who interact with him (parent, spouse, friend, teacher, manager, colleague, etc.) often have complementary information about his ability, but also a vested interest in his completing the task. This generates an incentive for such principals to distort their signals so as to manipulate the agent’s self-confidence. We first study situations where an informed principal chooses an incentive structure, such as offering payments or rewards, delegating a task, or simply giving encouragement. We show that rewards may be weak reinforcers in the short term and that, as stressed by psychologists, they may have hidden costs in that they become negative reinforcers once withdrawn. By offering a low–powered incentive scheme, the principal signals that she trusts the agent. Conversely, rewards (extrinsic motivation) have a limited impact on the agent’s current performance, and reduce his intrinsic motivation to undertake similar tasks in the future. Similarly, empowering the agent is likely to increase his motivation and effort, while offers of help or assistance may create dependence. More generally, we identify under which conditions the hidden costs of rewards are a myth or a reality. We then consider the fact that people often criticize or downplay the achievements of their spouse, child, colleague, coauthor, subordinate or teammate. We formalize such situations of ego–bashing, and argue that they may reflect battles for dominance. By lowering the other’s ego, an individual may gain (or regain) real authority within the relationship. Finally, we turn to the case where it is the agent who has superior information, and may attempt to signal it t

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Paper provided by Economics Department, Princeton University in its series Princeton Economic Theory Papers with number 00s2.

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Date of creation: Dec 1999
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Handle: RePEc:wop:prinet:00s2
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  1. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  2. Bénabou, Roland & Tirole, Jean, 2000. "Self-Confidence: Intrapersonal Strategies," CEPR Discussion Papers 2580, C.E.P.R. Discussion Papers.
  3. repec:ner:ucllon:http://discovery.ucl.ac.uk/17678/ is not listed on IDEAS
  4. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
  5. Jean Tirole & Jean-Jaques Laffont, 1987. "Repeated Auctions of Incentive Contracts, Investment and Bidding Parity With an Application to Takeovers," Working papers 463, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  7. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 529-44, July.
  8. Kreps, David M, 1997. "Intrinsic Motivation and Extrinsic Incentives," American Economic Review, American Economic Association, vol. 87(2), pages 359-64, May.
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