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ERNST FEHR
University of Zurich - Institute for Empirical Economic Research; Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)
ARMIN FALK
Institute for the Study of Labor (IZA); University of Bonn - Economic Science Area; Centre for Economic Policy Research (CEPR)
May 2002
IZA Discussion Paper No. 507; CESifo Working Paper Series No. 714; Zurich IEER Working Paper No. 95
Abstract:
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically questionable view of human motivation. The purpose of this paper is to show that this narrow view of human motivation may severely limit understanding the determinants and effects of incentives. Economists may fail to understand the levels and the changes in behaviour if they neglect motives like the desire to reciprocate or the desire to avoid social disapproval. We show that monetary incentives may backfire and reduce the performance of agents or their compliance with rules. In addition, these motives may generate very powerful incentives themselves.
Keywords: Incentives, Contracts, Reciprocity, Social Approval, Social Norms, Intrinsic Motivation
JEL Classifications: J41, C91, D64
Working Paper Series
Abstract has been viewed 1612 times
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Contact Information for ERNST FEHR (Contact Author)
Email address for ERNST FEHR
University of Zurich - Institute for Empirical Economic Research
Bluemlisalpstrasse 10
CH-8006 Zurich
Switzerland
+41 1 634 3709 (Phone)
+41 1 634 4907 (Fax)
Email address for ERNST FEHR
Massachusetts Institute of Technology (MIT) - Department of Economics
50 Memorial Drive
Cambridge , MA 02142
United States
(No e-mail address available for ERNST FEHR
Centre for Economic Policy Research (CEPR)
90-98 Goswell Road
London EC1V 7RR
United Kingdom
(No e-mail address available for ERNST FEHR
CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Poschinger Str. 5
DE-81679 Munich
Germany
(No e-mail address available for ERNST FEHR
Institute for the Study of Labor (IZA)
P.O. Box 7240
D-53072 Bonn
Germany
Contact Information for ARMIN FALK
Email address for ARMIN FALK
Institute for the Study of Labor (IZA)
P.O. Box 7240
D-53072 Bonn
Germany
(No e-mail address available for ARMIN FALK
University of Bonn - Economic Science Area
Adenauerallee 24-42
D-53113 Bonn
Germany
(No e-mail address available for ARMIN FALK
Centre for Economic Policy Research (CEPR)
90-98 Goswell Road
London EC1V 7RR
United Kingdom
Suggested Citation
Fehr, Ernst and Falk, Armin, "Psychological Foundations of Incentives" (May 2002). IZA Discussion Paper No. 507; CESifo Working Paper Series No. 714; Zurich IEER Working Paper No. 95. http://ssrn.com/abstract=294287
Hardcopies For Libraries: contact Gertraud Porak, Postal: CESifo Inc., Poschinger Str. 5, 81679 Munich, Germany. Mailto:porak@CESifo.de
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757 |
Dec 17, 2001 |
396K | 3.31 minutes |
SSRN_ID294287_code011217500.pdf |
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