Bad NGOs? Competition in the market for donations and workers' misconduct

In this paper, we investigate how competition among NGOs to attract donations affects the behavior of NGOs' employees. NGOs hire workers to undertake development projects, which are horizontally and vertically differentiated. Workers can engage in constructive activities, which enhance project quality, but also in non-observable destructive activities, that damage their employer. NGOs provide their workers with monetary incentives in order to induce them to exert the desired level of constructive effort, but NGOs also need to monitor their employees to curb destructive behavior. When workers' activities are complementary, we obtain the following results: (i) monitoring can fully deter workers' destructive behavior, provided that NGOs do not particularly care about the quality of their projects; (ii) an increase in the degree of competition in the market for development aid raises project quality, but also leads to higher destructive effort, thereby exposing NGOs to scandals; (iii) intense competition has detrimental effects because it leads to insufficient monitoring and excessive destructive behavior relative to the social optimum

Competition and Screening with Skilled and Motivated Workers

We study optimal contracts offered by two firms competing for the exclusive services of one worker, who is privately informed about her ability and her motivation. Firms differ both in their production technology and in the mission they pursue and a motivated worker is keen to be hired by the mission-oriented firm. We find that the matching of worker types to firms is always Pareto-efficient. When the difference in firms’ technology is high, only the most efficient firm is active. When the difference is not very high, then agent types sort themselves by motivation: the mission-oriented firm hires motivated types and the profit-oriented firm employs non-motivated ones, independently of ability. Effort provision is higher when the worker is hired by the mission-oriented firm, but a compensating wage differential might exist: the motivated worker is paid less by the mission-oriented firm. Such an earnings penalty is driven entirely by motivation, is increasing in ability and is associated to low power of incentives

Competition and screening with motivated health professionals

Two hospitals compete for the exclusive services of health professionals, who are privately informed about their ability and motivation. Hospitals differ in their ownership structure and in the mission they pursue.The non-profit hospital sacrifices some profits to follow its mission but becomes attractive for motivated workers. In equilibrium, when both hospitals are active, the sorting of workers to hospitals is efficient and ability-neutral. Allocative distortions are decreasing in the degree of competition and disappear when hospitals are similar. The non-profit hospital tends to provide a higher amount of care and offer lower salaries than the for-profit one

Bidimensional Screening with Intrinsically Motivated Workers

We study the screening problem of a firm that needs to hire a worker to produce output and that observes neither the productive ability nor the intrinsic motivation of the job applicant. We completely characterize the set of optimal contracts according to whether motivation or ability is the main determinant of the worker’s performance. We show that it is always in the firm’s interest to hire all types of worker and to offer different contracts to different types of employees. Interestingly, when motivation is very high, incentives force the firm to pay higher informational rents, to increase effort distorsions for motivated workers, and to offer a strictly positive wage to workers enjoying a positive utility from effort provision, who thus become paid volunteers. These results suggest that, from the principal’s viewpoint, very high motivation might not be a desirable worker’s characteristic

The Lemons Problem in a Labor Market with Intrinsic Motivation: When Higher Salaries Pay Worse Workers

We study the Lemons Problem when workers have private information on both their skills and their intrinsic motivation for the job offered by firms in the labor market. We first show that, when workers are motivated, inefficiencies due to adverse selection are mitigated. More interestingly, depending on the association between productivity and motivation, higher salaries affect the pool of candidates in three possible ways: they can attract (i) more skilled but less motivated applicants, as expected; (ii) more skilled and more motivated applicants; (iii) less skilled and less motivated applicants. The last two counterintuitive effects can only occur when a positive correlation exists between productivity and motivation. Our results are relevant in the policy debate on whether it is possible to improve the quality of workers in vocational markets by changing their wage rate and reconcile the different empirical evidence provided so far on motivated workers such as public servants, teachers, health professionals and, politicians

Bidimensional Screening with Intrinsically Motivated Workers

Se presenta el algoritmo de Arquímedes para la aproximación de π, así como su demostración utilizando funciones trigonométricas. A partir de este algoritmo, se ofrece un sencillo método iterativo para determinar el número mínimo de lados de un polígono regular, tanto inscrito como circunscrito, para que su perímetro se aproxime a π con un error dado. Arquímedes, a lo largo del cálculo en su algoritmo, realiza una serie de aproximaciones racionales: en la iteración inicial (aproximando la raíz cuadrada de 3), en cada una de las aproximaciones racionales de raíces cuadradas de números elevados y en la aproximación final de los racionales obtenidos convirtiéndolos en racionales más simples. Presentamos demostraciones matemáticas de todas estas aproximaciones racionales haciendo uso de las propiedades de las fracciones continuas.Archimedes algorithm for approximating π is presented as well as a proof using trigonometric functions. From this algorithm, a simple iterative method for calculating the minimum number of sides of a regular polygon, both inscribed and circumscribed, is provided, so that its perimeter approaches π for a given error. Archimedes, along the calculation in its algorithm, performs a series of rational approximations: in the initial iteration (approximating the square root of 3), in each of the rational approximations of square roots of large numbers and in the approximation of the rationals obtained into more simple rationals. We present mathematical proofs for all these rational approximations by using the properties of continued fractions.Matemática

Countervailing power? Collusion in markets with decentralized trade

We consider the collective incentives of buyers and sellers to form cartels in markets where trade is realized through decentralized pairwise bargaining. Cartels are coalitions of buyers or sellers that limit market participation and compensate inactive members for abstaining from trade. In a stable market outcome, cartels set Nash equilibrium quantities and cartel memberships are immune to defections. We prove that the set of stable market outcomes is non-empty and we provide its full characterization. Stable market outcomes are of two types: (i) at least one cartel actively restrains trade and the levels of market participation are balanced, or (ii) only one cartel, eventually the cartel that forms on the long side of the market, is active and it reduces trade slightly below the opponent's

Countervailing Power? Collusion in Markets with Decentralized Trade

Trabajo publicado como artículo en Review of Economic Design 15(2):91-120(2009).-- http://dx.doi.org/10.1007/s10058-009-0093-8We consider the collective incentives of buyers and sellers to form cartels in markets where trade is realized through decentralized pairwise bargaining. Cartels are coalitions of buyers or sellers that limit market participation and compensate inactive members for abstaining from trade. In a stable market outcome, cartels set Nash equilibrium quantities and cartel memberships are immune to defections. We prove that the set of stable market outcomes is non-empty and we provide its full characterization. Stable market outcomes are of two types: (i) at least one cartel actively restrains trade and the levels of market participation are balanced, or (ii) only one cartel, eventually the cartel that forms on the long side of the market, is active and it reduces trade slightly below the opponent's.We acknowledge financial support from the Catalan Government (grants 2000BEAI200120 to Burani and 2000SGR-0054 to Ponsati) and the Spanish Ministry of Education (grants PB98-970 and PR2000-0143 to Ponsati)