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Team Incentives under Moral and Altruistic Preferences: Which Team to Choose?

Sarkisian, Roberto (2017) Team Incentives under Moral and Altruistic Preferences: Which Team to Choose? TSE Working Paper, n. 17-838, Toulouse

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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.

Item Type: Monograph (Working Paper)
Language: English
Date: August 2017
Place of Publication: Toulouse
Uncontrolled Keywords: Moral hazard in teams, optimal contracts, homo moralis preferences, altruism
JEL Classification: D03 - Behavioral Economics; Underlying Principles
D82 - Asymmetric and Private Information
D86 - Economics of Contract - Theory
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 16 Apr 2018 15:26
Last Modified: 16 Apr 2018 15:26
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