Competition and Incentives with Motivated Agents

45 Pages Posted: 16 Jul 2008

See all articles by Timothy J. Besley

Timothy J. Besley

London School of Economics & Political Science (LSE) - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Maitreesh Ghatak

London School of Economics (LSE) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 2003

Abstract

A unifying theme in the literature on organizations such as public bureaucracies and private non-profits is the importance of missions, as opposed to profit, as an organizational goal. Such mission-oriented organizations are frequently staffed by motivated agents who subscribe to the mission. This paper studies incentives in such contexts and emphazises the role of matching principals' and agents' mission preferences in increasing organizational efficiency. Matching economizes on the need for high-powered incentives. However, it can also entrench bureaucratic conservatism and resistance to innovations. The framework developed in this paper is applied to school competition, incentives in the public sector and in private non-profits, and the interdependence of incentives and productivity between the private for-profit sector and the mission-oriented sector through occupational choice.

JEL Classification: D23, O32, O34

Suggested Citation

Besley, Timothy J. and Ghatak, Maitreesh, Competition and Incentives with Motivated Agents (November 2003). LSE STICERD Research Paper No. TE465, Available at SSRN: https://ssrn.com/abstract=1160996

Timothy J. Besley (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Maitreesh Ghatak

London School of Economics (LSE) - Department of Economics ( email )

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United Kingdom
44 20 7852 3568 (Phone)
44 20 7955 6951 (Fax)

HOME PAGE: http://sticerd.lse.ac.uk/dps/adds/ghatak/cv-lse-sept02.pdf

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