Intrinsically Motivated Agents in Teams

I develop a principal-agent model where a profit-maximizing principal employs two agents to undertake a project. The employees differ in terms of their intrinsic motivation towards the project and this is their private information. I analyze the impact of individual and team incentives on the screening problem of employees with different degrees of motivation within teams. If the principal conditions each agent's wage on his own level of effort (individual incentives), an increase of the rents paid to the motivated agents results in a lower level of effort exerted by all agents in the second-best. In this case, reversal incentives occur. Conversely, reversal incentives do not arise if theprincipal uses team-incentives. If the principal conditions each agent's wage on the effort of both agents and the agent's performance on the effort of his colleague (team-incentives), motivated agents exert the same level of effort as in the first-best

Firms' ownership, employees' altruism, and competition

The paper investigates how product market competition affects the firms' decision to hire altruistic or selfish employees in a mixed duopoly where a public and a private firm compete against each other on prices and quality. When firms offer similar services, so that product competition is fierce, both firms benefit from hiring altruistic employees even if it leads to lower prices. Conversely, when firms offer sufficiently differentiated services, the private firm prefers to hire selfish employees as starting a price war with the public firm is not profitable. However, the private firm would hire altruistic employees if it faced another private firm. Therefore, when firms offer differentiated products, customers may benefit from the privatization of the public firm, especially when the employees' degree of altruism is high

Envy in Mission-Oriented Organizations

According to the labor donation theory, workers adhering to their firms' mission are willing to donate a portion of their paid labor. In this paper, we study how workers' fairness concerns limit the firm's ability to extract labor donation from its employees. We find that, in sectors where the firm's mission is important, optimal contracts are such that high-ability employees perceive their wage as less fair than low-ability employees and they must be rewarded with an “envy rent". The opposite is true in sectors where the firm's mission does not play a relevant role. We empirically test the predictions of the model using the German Socio-Economic Panel finding support for our theoretical results

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

Pay for performance with motivated employees

Heterogeneity in intrinsic motivation affects the optimal contract offered to employees in teams. Under individual incentives, the effort exerted by both motivated and selfish employees is distorted. This distortion is mitigated if employees receive a wage based on team performance. As a result, the principal prefers to use team incentives, while motivated employees are better off with individual incentives

Delegation with a Reciprocal Agent

We consider a model in which a principal may delegate the choice of a project to a better informed agent. The preferences of the agent and the principal about which project should be undertaken may be discordant. Moreover, the agent benefits from being granted more discretion in the project choice and may be motivated by reciprocity. We find that the relationship between the agent's reciprocity and discretion crucially depends on the conflict of interest with the principal. When preferences are more congruent (discordant), discretion is broader (more limited) if the agent is more reciprocal. Hence, reciprocity mitigates (exacerbates) a mild (severe) conflict of interest. We also present supportive evidence for the predictions of our model using the German Socio-Economic Panel dataset

Customer-Oriented Employees: Blessing or Curse for Firms?

I investigate whether the presence of customer-oriented employees benefi ts fi rms in a competitive environment. Employees are defi ned as customer-oriented if they are interested not only in their wage but also in the well-being of their customers. I find that fi rms may obtain higher profi ts by hiring self-interested rather than customer-oriented employees. This is because the employees' customer orientation has opposing effects on the profi ts obtained by the fi rms. On the one hand, customer-oriented employees provide a given level of quality for a lower wage. On the other hand, the employees' customer orientation increases competition reducing prices. If the second effect dominates, firms fi nd themselves trapped in a prisoners' dilemma as the strategy of hiring self-interested employees is strictly dominated by that of hiring customer-oriented employees. Hence, the very presence of customer-oriented employees may hurt fi rms. If motivated employees are merely interested in the quality of the good provided, the effect on the price outlined before disappears

Envy in the workplace

I study how envy in the workplace affects the optimal employment contract when employees differ in their productivity and this is their private information. The employees' envy towards their colleagues distorts the levels of effort exerted by the less productive employees. However, when employees are also envious towards their boss this distortion is mitigated

Platform Price Parity Clauses and Segmentation [WP]

We investigate how the adoption of price parity clauses (PPCs) by established platforms affects the listing decisions of suppliers. PPCs have been widely adopted by online travel agencies (OTAs) to force client hotels not to charge lower prices in alternative sales channels. We find that OTAs adopt PPCs when they are perceived as highly substitutable, and in order to prevent showrooming. PPCs allow OTAs to charge hotels higher commission fees. However, hotels can respond by delisting themselves from some OTAs. Hence, our analysis reveals that the removal of PPCs enables more hotels to resort to OTAs. This is beneficial for consumers, as prices decrease in absence of PPCs