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Crowding Effects and Work Ethics
Author(s) -
Grepperud Sverre,
Pedersen Pål Andreas
Publication year - 2006
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/j.1467-9914.2006.00315.x
Subject(s) - incentive , principal (computer security) , crowding out , crowding , intrinsic motivation , payment , economics , microeconomics , work (physics) , principal–agent problem , computer science , monetary economics , psychology , social psychology , cognitive psychology , computer security , engineering , finance , mechanical engineering , corporate governance
. This paper analyses optimal contracts in a principal–agent model where the agent is intrinsically motivated, 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 make better achievements without implementing any economic incentives. Furthermore, it is shown that when high‐powered incentives reduce intrinsic motivation (crowding‐out), the first‐best solution in a principal–agent framework is unattainable.