Positive self-image and incentives in organizations

Luis Santos-Pinto ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the implications of individuals’ mistaken beliefs of their abilities on incentives in organizations using the principal-agent model of moral hazard. The paper shows that if effort is observable, then an agent’s mistaken beliefs about own ability are always favorable to the principal. However, if effort is unobservable, then an agent’s mistaken beliefs about own ability can be either favorable or unfavorable to the principal. The paper provides conditions under which an agent’s over estimation about own ability is favorable to the principal when effort is unobservable. Finally, the paper shows that workers’ mistaken beliefs about their coworkers’ abilities make interdependent incentive schemes more attractive to firms than individualistic incentive schemes.

Keywords: Positive Self-Image; Incentives; Moral Hazard; Behavioral Economics (search for similar items in EconPapers)
JEL-codes: A12 J41 (search for similar items in EconPapers)
Date: 2003-09-03, Revised 2007-02-14
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Positive Self-image and Incentives in Organisations (2008)
Journal Article: Positive Self‐image and Incentives in Organisations (2008)
Working Paper: Positive self-image and incentives in organizations (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:3141

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