Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes

31 Pages Posted: 22 Sep 2006

See all articles by Dirk Sliwka

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management; IZA Institute of Labor Economics

Date Written: September 2006

Abstract

An explanation for motivation crowding-out phenomena is developed in a social preferences framework. Besides selfish and fair or altruistic types a third type of agents is introduced: These "conformists" have social preferences if they believe that sufficiently many of the others do too. When there is asymmetric information about the distribution of preferences (the "social norm"), the incentive scheme offered or autonomy granted can reveal a principal's beliefs about that norm. High-powered incentives may crowd out motivation as pessimism about the norm is conveyed. But by choosing fixed wages or granting autonomy the principal may signal trust in a favorable social norm.

Keywords: social preferences, incentives, intrinsic motivation, motivation crowding-out

JEL Classification: M52, J33, D23

Suggested Citation

Sliwka, Dirk, Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes (September 2006). IZA Discussion Paper No. 2293. Available at SSRN: https://ssrn.com/abstract=932028

Dirk Sliwka (Contact Author)

University of Cologne - Department of Business Administration and Human Resource Management ( email )

Koln, 50923
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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