The Crowding-Out of Work Ethics

Sverre Grepperud and Pål Andreas Pedersen
Additional contact information
Pål Andreas Pedersen: Bodø Graduate School of Business, Postal: N-8049 Bodø, Norway

No 2001:4, HERO Online Working Paper Series from University of Oslo, Health Economics Research Programme

Abstract: This paper analyses optimal contracts in a principal-agent model where the agent is intrinsically motivated at the outset and there is an endogenous relationship between the structure of incentive payments and intrinsic motivation (crowding effects). The analysis shows that crowding effects have implications for the optimal contract and that under some conditions the principal can do better without implementing any economic incentives. Furthermore, it is shown that when high-powered incentives diminish intrinsic motivation (crowding-out) the first-best solution in a principal-agent framework is unattainable.

Keywords: Agency theory; intrinsic motivation; crowding effects (search for similar items in EconPapers)
JEL-codes: J01 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2009-06-30
New Economics Papers: this item is included in nep-cbe, nep-cta and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: The Crowding-out of Work Ethics (2001)
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