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First we discuss how extrinsic incentives may come into conflict with other motivations. For example, monetary incentives from principals may change how tasks are perceived by agents, with negative effects on behavior. In other cases, incentives might have the desired effects in the short term, but they still weaken intrinsic motivations. To put it in concrete terms, an incentive for a child to learn to read might achieve that goal in the short term, but then be counterproductive as an incentive for students to enjoy reading and seek it out over their lifetimes. Next we examine the research literature on three important examples in which monetary incentives have been used in a nonemployment context to foster the desired behavior: education; increasing contributions to public goods; and helping people change their lifestyles, particularly with regard to smoking and exercise. The conclusion sums up some lessons on when extrinsic incentives are more or less likely to alter such behaviors in the desired directions.

Internal competition may motivate worker effort, yet the benefits of competition may depend critically on workers’ relative abilities: large skill differences may reduce efforts. I use panel data from professional golf tournaments and find that the presence of a superstar is associated with lower performance. On average, golfers’ first-round scores are approximately 0.2 strokes worse when Tiger Woods participates relative to when Woods is absent. The overall tournament effect is 0.8 strokes. The adverse superstar effect varies with the quality of Woods’s play. There is no evidence that reduced performance is attributable to media attention intensity or risky strategy adoption.

This paper estimates social effects of incentivizing people in teams. In three field experiments featuring exogenous team formation and opportunities for repeated social interactions, we find large team effects that operate through social channels. In particular, assignment to a team treatment increases productivity by 9%–17% relative to an individual incentive treatment, even though the individual incentive yields a higher private return. Further, we find that in a choice treatment individuals overwhelmingly prefer the individual incentive to the team incentive, despite the latter being more effective. These results are most consistent with the team effects operating through guilt or social pressure as opposed to pure altruism.

Teacher contracts that condition pay and retention on demonstrated performance can improve selection into and out of teaching. I study alternative contracts in a simulated teacher labor market that incorporates dynamic self-selection and Bayesian learning. Bonus policies create only modest incentives and thus have small effects on selection. Reductions in tenure rates can have larger effects, but must be accompanied by substantial salary increases; elimination of tenure confers little additional benefit unless firing rates are extremely high. Benefits of both bonus and tenure policies exceed costs, though optimal policies are sensitive to labor market parameters about which little is known.

In this study, we use the lens of social exchange theory to investigate the influence of incentives on supplier performance under various conditions of buyer–supplier dependence. We propose that incentives generally fall into two main categories: competitive, market‐based incentives that reward suppliers based on how well they perform relative to other suppliers, and cooperative incentives, where both buyer and supplier share benefits based on their joint performance. Using empirical data collected from 230 buyers in a sample of U.S. industrial firms, we measure the effects of these two types of incentives on various measures of performance, as well as the moderating effects of buyer–supplier dependence. Our results suggest that competitive incentives can be an effective approach to improving delivery, quality, innovation and flexibility, for purchases where the buyer–supplier relationship is characterized by balanced and moderate amounts of mutual dependence. However, competitive incentives are ineffective at generating improved cost performance. Cooperation appears to be the only way to improve cost but is only fruitful under conditions of high mutual dependence. In general, we find that high mutual dependence provides a good basis for cooperative incentives to successfully improve each of the types of performance included in our study. Finally, we find evidence that cooperation and competition can coexist without significant risk of decreased performance.

This paper reviews the role of locus of control in the labor market. I begin with a discussion of the conceptual origins of locus of control, including its relationship to related concepts such as self-efficacy, motivation, and self-control. The relationship between locus of control and labor market success is then summarized. In doing so, I pay careful attention to what we know about three potential mechanisms - human capital investments, hiring decisions, and optimal incentive contracts - through which locus of control might operate. Finally, the broader implications of these relationships for public policy and future research are discussed.

We examine whether students respond to immediate financial incentives when choosing their college major. From 2006–2007 to 2010–2011, low-income students in technical or foreign language majors could receive up to $8,000 in SMART Grants. Since income-eligibility was determined using a strict threshold, we determine the causal impact of this grant on student major with a regression discontinuity design. Using administrative data from public universities in Texas, we determine that income-eligible students were 3.2 percentage points more likely than their ineligible peers to major in targeted fields. We measure a larger impact of 10.2 percentage points at Brigham Young University.

\"We use the principal-agent model as a focal theoretical frame for synthesizing what we know, both theoretically and empirically, about the design and dynamics of the implementation of performance management systems in the public sector. In this context, we review the growing body of evidence about how performance measurement and incentive systems function in practice and how individuals and organizations respond and adapt to them over time, drawing primarily on examples from performance measurement systems in public education and social welfare programs. We also describe a dynamic framework for performance measurement systems that takes into account strategic behavior of individuals over time, learning about production functions and individual responses, accountability pressures, and the use of information about the relationship of measured performance to value added. Implications are discussed and recommendations derived for improving public sector performance measurement systems.\" (Author's abstract, IAB-Doku). Forschungsmethode: deskriptive Studie.

It is necessary for one senior executive (she) to monitor her project manager (he) who conducts early research stage followed by a later development stage in new product development. In this paper, we analyze two monitoring mechanisms: (1) the idea information-based monitoring (IM) mechanism wherein the senior executive engages one supervisor to monitor the project manager’s idea information; (2) the effort-based monitoring (EM) mechanism wherein the senior executive engages another supervisor to monitor the project manager’s effort. Within the framework of uncertainty theory, we first present two classes of bilevel uncertain principal-agent monitoring models, and then derive their respective optimal incentive contracts. We find that the senior executive should set the incentive term as high as possible to motivate each supervisor to monitor the project manager’s idea information and effort no matter how much the design idea value is. We also find that EM mechanism can always dominate IM mechanism when the monitoring costs are equal. Moreover, comparing with a no monitoring scenario, we identify two values of monitoring: the value of monitoring idea information and the value of monitoring effort. Our results show that adopting IM and EM mechanisms can improve the senior executive’s profits obtained in the no monitoring scenario when the revenue uncertainty is sufficiently low. The results also indicate that the value of monitoring idea information decreases as the risk aversion level of the project manager improves, while the value of monitoring effort shows the opposite feature.

This study capitalizes on a natural expenment that occurred in California between 2000 and 2002. In those years, the state offered a competitively allocated $ 20,000 incentive called the Governors Teaching Fellowship (GTF) aimed at attracting academically talented, novice teachers to low-performing schools and retaining them in those schools for at least four years. Taking advantage of data on the career histories of 27,106 individuals who pursued California teaching licenses between 1998 and 2003, we use an instrumental variable strategy to estimate the unbiased impact of the GTF on the decisions of recipients to begin working in low-performing schools within 2 years after licensure program enrollment. We estimate that GTF recipients would have been less likely to teach in low-performing schools than observably similar counterparts had the GTF not existed, but that acquiring a GTF increased their probability of doing so by 28 percentage points. Examining retention patterns, we find that 75 percent of both GTF recipients and nonrecipients who began working in low-performing schools remained in such schools for at least four years.