Incentives and Group Identity

Paolo Masella, Stephan Meier () and Philipp Zahn ()
Additional contact information
Stephan Meier: Columbia University
Philipp Zahn: University of Mannheim

No 6815, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates in a principal-agent environment whether and how group membership influences the effectiveness of incentives and when incentives can have “hidden costs”, i.e., a detrimental effect. We show experimentally that in all interactions control mechanisms can have hidden costs for reasons specific to group membership. In within-group interactions control has detrimental effects because the agent does not expect to be controlled and reacts negatively when being controlled. In between-group interactions, agents perceive control more hostile once we condition on their beliefs about principal's behavior. Our finding contributes to the micro-foundation of psychological effects of incentives.

Keywords: trust; crowding out; motivation; incentives; social preferences; social identity; experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 Z13 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2012-08
New Economics Papers: this item is included in nep-bec, nep-cbe, nep-cta, nep-evo, nep-exp, nep-hrm and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: Games and Economic Behavior, 2014, 86, 12-25

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Journal Article: Incentives and group identity (2014)
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