Incentives for Motivated Agents under an Administrative Constraint

Paper number: 06/01

Paper date: 2 February 2006

Year: 2006

Paper Category: Working Paper

Authors

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 veri able 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.

Incentives for Motivated Agents under an Administrative Constraint Incentives for Motivated Agents under an Administrative Constraint