Pride and Prejudice: The Human Side of Incentive Theory

42 Pages Posted: 19 Sep 2006

See all articles by Tore Ellingsen

Tore Ellingsen

Stockholm School of Economics - Department of Economics; Norwegian School of Economics (NHH) - Department of Economics

Magnus Johannesson

Stockholm School of Economics - Department of Economics

Date Written: July 2006

Abstract

Many people are sensitive to social esteem, and their pride is a source of pro-social behavior. We present a game-theoretic model in which sensitivity to esteem varies across players and may depend on context as well players' beliefs about their opponents. For example, the pride associated with a generous image is greater when the player holding the image is in fact generous and believes the observers to be generous as well. The model can account both for the fact that players' behaviour sometimes depends on the opponents' unchosen options and for the prevalence of small symbolic gifts. Perhaps most importantly, the model offers an explanation for motivational crowding out: Control systems and pecuniary incentives may erode morale by signalling to the agent that the principal is not worth impressing.

Keywords: Motivational crowding out, esteem, incentives, framing, social preferences

JEL Classification: D1, D23, D82, Z13

Suggested Citation

Ellingsen, Tore and Johanneson, Magnus, Pride and Prejudice: The Human Side of Incentive Theory (July 2006). CEPR Discussion Paper No. 5768, Available at SSRN: https://ssrn.com/abstract=931504

Tore Ellingsen (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46 8 736 9260 (Phone)
+46 8 31 3207 (Fax)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Magnus Johanneson

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden
+46 8 736 9443 (Phone)

HOME PAGE: http://www.hhs.se/Faculty/showperson.htm?personid=198

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