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Incentives for Motivated Agents under an Administrative Constraint

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  • Miltiadis Makris
Abstract
Consider an agent who has an expertise in producing a non-marketable good. This good is valued by a single principal, and there is a verifiable measure of the agent's performance. Crucially, the agent is intrinsically motivated due to 'warm glow altruism'. In addition, the agent's budget, which is controlled by the principal, must not be less than the monetary performance-cost faced by the agent. This gives rise to a limited-liability constraint. It also restricts the agent's ability to under-report costs. In such environment, we determine the link between the agent's budget and performance. Our results come in contrast to the received solution of the principal-agent problem and to most in the literature on mission-motivated organisations and public services provision.

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  • Miltiadis Makris, 2009. "Incentives for Motivated Agents under an Administrative Constraint," Post-Print hal-00683158, HAL.
    • Handle: RePEc:hal:journl:hal-00683158
    DOI: 10.1016/j.jebo.2009.03.013
    Note: View the original document on HAL open archive server: https://hal.science/hal-00683158
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    Cited by:

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    2. Dongsoo Shin, 2017. "Optimal Loyalty‐Based Management," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 429-453, June.
    3. Ghandour, Ziad & Siciliani, Luigi & Straume, Odd Rune, 2022. "Investment and quality competition in healthcare markets," Journal of Health Economics, Elsevier, vol. 82(C).
    4. Barigozzi, Francesca & Burani, Nadia, 2016. "Competition and screening with motivated health professionals," Journal of Health Economics, Elsevier, vol. 50(C), pages 358-371.
    5. Dietrichson, Jens, 2013. "Coordination Incentives, Performance Measurement and Resource Allocation in Public Sector Organizations," Working Papers 2013:26, Lund University, Department of Economics.
    6. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2018. "Can Competition Reduce Quality?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 174(3), pages 421-447, September.
    7. Hennig-Schmidt, Heike & Wiesen, Daniel, 2014. "Other-regarding behavior and motivation in health care provision: An experiment with medical and non-medical students," Social Science & Medicine, Elsevier, vol. 108(C), pages 156-165.
    8. Galina Besstremyannaya & Sergei Golovan, 2019. "Physician’s altruism in incentive contracts: Medicare’s quality race," CINCH Working Paper Series 1903, Universitaet Duisburg-Essen, Competent in Competition and Health.
    9. Kristensen, Søren Rud & Siciliani, Luigi & Sutton, Matt, 2016. "Optimal price-setting in pay for performance schemes in health care," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 57-77.
    10. Anthony Scott & Peter Sivey, 2022. "Motivation and competition in health care," Health Economics, John Wiley & Sons, Ltd., vol. 31(8), pages 1695-1712, August.
    11. Liu, Ting & Albert Ma, Ching-to & Mak, Henry Y., 2018. "Incentives for motivated experts in a partnership," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 296-313.
    12. Mishra, Ajit & Sarangi, Sudipta, 2016. "High-powered incentives and communication failure," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 51-60.
    13. Liu, Ting & Ma, Ching-to Albert, 2013. "Health insurance, treatment plan, and delegation to altruistic physician," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 79-96.
    14. repec:nip:nipewp:10/2014 is not listed on IDEAS
    15. Burani, Nadia & Palestini, Arsen, 2016. "What determines volunteer work? On the effects of adverse selection and intrinsic motivation," Economics Letters, Elsevier, vol. 144(C), pages 29-32.
    16. Schinkel, M.P. & Tóth, L. & Tuinstra, J., 2014. "Discretionary Authority and Prioritizing in Government Agencies," CeNDEF Working Papers 14-15, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    17. F. Barigozzi & N. Burani, 2016. "Competition Between For-Profit and Non-Profit Firms: Incentives, Workers Self-Selection, and Wage Differentials," Working Papers wp1072, Dipartimento Scienze Economiche, Universita' di Bologna.
    18. Nadia Burani, 2021. "No mission? No motivation. On hospitals' organizational form and charity care provision," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3203-3219, December.
    19. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2012. "Quality competition with profit constraints," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 642-659.
    20. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2017. "Hospital Mergers with Regulated Prices," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(3), pages 597-627, July.
    21. Olivella, Pau & Siciliani, Luigi, 2017. "Reputational concerns with altruistic providers," Journal of Health Economics, Elsevier, vol. 55(C), pages 1-13.
    22. Arce, Daniel G., 2013. "Principals’ preferences for agents with social preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 90(C), pages 154-163.
    23. Ziad R. Ghandour, 2019. "Public-Private Competition in Regulated Markets," NIPE Working Papers 02/2019, NIPE - Universidade do Minho.
    24. Miltiadis Makris, 2006. "Political authority, expertise and government bureaucracies," Public Choice, Springer, vol. 127(3), pages 267-284, June.
    25. Jonathan Lipow & Jay Simon, 2014. "Attitude, Aptitude, and Testing in the Efficient Mobilization of Military Manpower," Defence and Peace Economics, Taylor & Francis Journals, vol. 25(2), pages 113-124, April.

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    More about this item

    Keywords

    D73; D82; H11; H41; L31; Mission-orientated Organisations; Asymmetric Information; Administrative Constraint;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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