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

Dirk Sliwka

No 2293, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: conformity; social norms; motivation crowding-out; incentives; intrinsic motivation; social preferences; trust; selection (search for similar items in EconPapers)
JEL-codes: D23 J33 M52 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2006-09
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-knm and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published - published in: American Economic Review, 2007, 97 (3), 999-1012

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Journal Article: Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes (2007)
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