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  3. American Economic Review
  4. June 2008
  5. Pride and Prejudice: The Human Side of Incentive Theory

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Pride and Prejudice: The Human Side of Incentive Theory

  • Tore Ellingsen
  • Magnus Johannesson
American Economic Review
vol. 98, no. 3, June 2008
(pp. 990–1008)
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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.

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

JEL Classification

  • D82 Asymmetric and Private Information