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Title:Psychological Foundations of Incentives PDF Logo
Authors:Fehr, Ernst
Falk, Armin
Issue Date:2002
Series/Report no.:IZA Discussion paper series 507
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.
Subjects:incentives
contracts
reciprocity
social approval
social norms
intrinsic motivation
JEL:D64
C91
J41
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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