This paper studies incentives provision when agents are characterized either by homo moralis preferences (Alger and Weibull, 2013, 2016), i.e. their utility is represented by a convex combination of selfish preferences and Kantian morality, or by altruism. In a moral hazard in teams setting with two agents whose efforts affect output stochastically, I demonstrate that the power of extrinsic incentives decreases with the degrees of morality and altruism displayed by the agents, thus leading to increased profits for the principal. I also show that a team of moral agents will only be preferred if the production technology exhibits decreasing returns to efforts, the probability of a high realization of output conditional on both agents exerting effort is suficiently high and either the outside option for the agents is zero or the degree of morality is suficiently low.
Moral hazard in teams; optimal contracts; homo moralis preferences; altruism;
- D03: Behavioral Microeconomics • Underlying Principles
- D82: Asymmetric and Private Information • Mechanism Design
- D86: Economics of Contract: Theory
Roberto Sarkisian, “Team Incentives under Moral and Altruistic Preferences: Which Team to Choose?”, TSE Working Paper, n. 17-838, August 2017.
Roberto Sarkisian, “Team Incentives under Moral and Altruistic Preferences: Which Team to Choose?”, Games, vol. 8, n. 3, September 2017.
Games, vol. 8, n. 3, September 2017