Pride and Prejudice: The Human Side of Incentive Theory
Stockholm School of Economics - Department of Economics; Norwegian School of Economics (NHH) - Department of Economics
Stockholm School of Economics - Department of Economics
CEPR Discussion Paper No. 5768
Many people are sensitive to social esteem, and their pride is a source of pro-social behavior. We present a game-theoretic model in which sensitivity to esteem varies across players and may depend on context as well players' beliefs about their opponents. For example, the pride associated with a generous image is greater when the player holding the image is in fact generous and believes the observers to be generous as well. The model can account both for the fact that players' behaviour sometimes depends on the opponents' unchosen options and for the prevalence of small symbolic gifts. Perhaps most importantly, the model offers an explanation for motivational crowding out: Control systems and pecuniary incentives may erode morale by signalling to the agent that the principal is not worth impressing.
Number of Pages in PDF File: 42
Keywords: Motivational crowding out, esteem, incentives, framing, social preferences
JEL Classification: D1, D23, D82, Z13working papers series
Date posted: September 19, 2006
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