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American Economic Review: Vol. 98 No. 3 (June 2008)

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Pride and Prejudice: The Human Side of Incentive Theory

Article Citation

Ellingsen, Tore, and Magnus Johannesson. 2008. "Pride and Prejudice: The Human Side of Incentive Theory." American Economic Review, 98(3): 990-1008.

DOI: 10.1257/aer.98.3.990

Abstract

Desire for social esteem is a source of prosocial behavior. We develop a model in which actors' utility of esteem depends on the audience. In a principal agent setting, we show that the model can account for motivational crowding out. Control systems and pecuniary incentives erode morale by signaling to the agent that the principal is not worth impressing. The model also offers an explanation for why agents are motivated by unconditionally high pay and by mission-oriented principals.

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Authors

Ellingsen, Tore (Stockholm School of Economics)
Johannesson, Magnus (Stockholm School of Economics)

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D82: Asymmetric and Private Information


American Economic Review


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