Competition and Incentives with Motivated Agents
45 Pages Posted: 16 Jul 2008
Date Written: November 2003
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: Suggested Citation