Job Assignments, Intrinsic Motivation and Explicit Incentives

This paper considers the interplay of job assignments with the intrinsic and extrinsic motivation of an agent. Job assignments influence the self confidence of the agent, and thereby his intrinsic motivation. Monetary reward allow the principal to complement intrinsic motivation with extrinsic incentives. The main result is that the principal chooses an inefficient job assignment rule to enhance the agent's intrinsic motivation even though she can motivate him with monetary rewards. This shows that, in the presence of intrinsically motivated agents, it is not possible to separate job assignment decisions from incentive provision.Intrinsic and Extrinsic Motivation, Job Assignments

Do You Know That I Am Biased? An Experiment

This experiment explores whether individuals know that other people are biased. We confirm that overestimation of abilities is a pervasive problem, but observe that most people are not aware of it, i.e. they think others are unbiased. We investigate several explanations for this result. As a first one, we discuss a possible unfamiliarity with the task and the subjects' inability to distinguish between random mistakes and a real bias.  Second, we show how the relation between a subject's belief about others and his belief about himself might be driven by a false consensus effect or self-correction mechanism. Third, we identify a self-serving bias when comparing how a subject evaluates his own and other people's biases.Bias, Overconfidence, Beliefs, Experimental Economics, Self-Serving Bias

Self-Regulation through Goal Setting

Goals are an important source of motivation. But little is known about why and how people set them. We address these questions in a model based on two stylized facts from psychology and behavioral economics: i) Goals serve as reference points for performance. ii) Present-biased preferences create self-control problems. We show how goals permit self-regulation, but also that they are painful self-disciplining devices. Greater self-control problems therefore lead to stronger self-regulation through goals only up to a certain point. For severely present-biased preferences, the required goal for self-regulation is too painful and the individual rather gives up.goals, self-control, motivation, time inconsistency, psychology

Goals and Psychological Accounting

We model how people formulate and evaluate goals to overcome self-control problems. People often attempt to regulate their behavior by evaluating goal-related outcomes separately (in narrow psychological accounts) rather than jointly (in a broad account). To explain this evidence, our theory of endogenous narrow or broad psychological accounts combines insights from the literatures on goals and mental accounting with models of expectations-based reference-dependent preferences. By formulating goals the individual creates expectations that induce reference points for task outcomes. These goal-induced reference points make substandard performance psychologically painful and motivate the individual to stick to his goals. How strong the commitment to goals is depends on the type of psychological account. We provide conditions when it is optimal to evaluate goals in narrow accounts. The key intuition is that broad accounts make decisions or risks in different tasks substitutes and thereby create incentives to deviate from goals. Model extensions explore the robustness of our results to different timing assumptions and goal and account revision.quasi-hyperbolic discounting, reference-dependent preferences, loss aversion, self-control, mental accounting, goals

Motivational Goal Bracketing

It is a puzzle why people often evaluate consequences of choices separately (narrow bracketing) rather than jointly (broad bracketing). We study the hypothesis that a present-biased individual, who faces two tasks, may bracket his goals narrowly for motivational reasons. Goals motivate because they serve as reference points that make substandard performance psychologically painful. A broad goal allows high performance in one task to compensate for low performance in the other. This partially insures against the risk of falling short of ones' goal(s), but creates incentives to shirk in one of the tasks. Narrow goals have a stronger motivational force and thus can be optimal. In particular, if one task outcome becomes known before working on the second task, narrow bracketing is always optimal.goals, multiple tasks, motivational bracketing, self-control, time inconsistency, psychology

Information and Incentives in Organizations

This thesis asks about the value of information for providing incentives in principal agent models with hidden action and limited liability. The classical literature deals with information in the form of signals that the principal (and the agent) receive after the agent's effort choice. It shows that such signals are beneficial if and only if they are informative about the agent's effort. In contrast to these papers, the first three chapters deal with situations where the principal and the agent observe the signal realization before the agent's effort choice. The fourth chapter considers ex post information. Chapter 1 endogenizes the timing of the signal and asks whether the principal prefers the agent to receive an additional signal before or after the agent chooses his effort. For decision problems it is well known that ex ante information is (weakly) beneficial. I show that there is no difference between incentive and decision problems if the signal is uninformative about the agent's effort. In contrast, if the signal is informative ex ante information does strictly worse. Chapter 2 assumes that the signal the agent observes is the output of a colleague. It identifies a positive effect that acts on the incentives of this colleague and interacts with the effects from Chapter 1. This can make ex ante information optimal even when the colleague's output is informative. I relate these findings to the organizational structure of a firm and its internal transparency. Chapter 3 keeps the timing fixed and asks whether the principal benefits from an additional signal that the agent observes before his effort choice. My finding that such additional information is not always beneficial contrasts with the classical result that more (ex post) information is (weakly) better. Chapter 4 considers ex post information and asks how the principal's desire to receive more information about the agent's effort leads to inefficient job assignments. A simple trade-off between incentive provision and job assignments explains the Peter Principle and delivers predictions consistent with empirical evidence from personnel economics

Information, decisions and incentives

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Information management and incentives

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Job assignments, intrinsic motivation and explicit incentives

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Timing of information in agency problems with hidden actions

This paper endogenizes in a standard hidden action model the point in time when a risk neutral and wealth constrained agent and the principal observe the realization of an additional signal: before the agent's effort choice (ex ante information) or after (ex post information). In a decision problem, ex ante information does (weakly) better than ex post information because the decision maker can tailor efforts to the information. We show that this is not the case for incentive problems: a negative incentive effect arises under ex ante information that prevails even though the principal tailors the agent's effort to the information.Moral hazard Timing of symmetric information Limited liability