Intrinsic and Extrinsic Motivation
Robert Östling
Outline
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Experimental results
Theoretical considerations
Bénabou & Tirole (2003, RES)
Bénabou & Tirole (2006, AER)
Ellingsen & Johannesson (2006)
Herold (2005)
Frey and Oberholzer-Gee (1997, AER)
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Question: Tests reaction to monetary compensation for the
acceptance of a nuclear waste repository in their community.
Setting: Hypothetical referendum voting question was posed to
subjects about if they were willing to permit the construction of a
nuclear waste repository in their community. The same question was
then repeated with a specific monetary compensation for accepting the
nuclear waste repository (varied between $2175, $4,350 and $6,525
per individual and year in three sub-samples). Everyone who rejected
the compensation then received another question with a higher
compensation ($3,263, $6,525, or $8,700).
Subjects: 305 interviews of randomly selected subjects in two
communities in Switzerland (potential sites for a nuclear waste
repository).
Results: Fraction of acceptance without monetary compensation:
50.8%. Fraction of acceptance with monetary compensation: 24.6%
(the amount of compensation had no significant effect on the
acceptance probability).
Gneezy & Rustichini (2000, QJE)
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Setting: Subjects were asked to answer a quiz consisting of 50 problems taken out of a
psychometric test used to scan university applicants (questions involving reasoning and
computation).
Treatments: 0 NIS (except show-up), 0.10 NIS, 1 NIS or 3 NIS per correct answer
Subjects: 160 subjects
Gneezy & Rustichini (2000, QJE)
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Setting: High-school students collected donations from the public to some charity (done in
Israel a few days a year). Students divided into pairs of students who collect money
together as a team.
Treatments: Baseline (speech), baseline + 1% of collected money, baseline + 10% of
collected money.
Subjects: 180 Israeli high-school students.
Gneezy & Rustichini (2000, JLS)
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Setting: A study of day-care centers in Israel. The day care centers operates between 7.30 and 16.00.
Before the study there was no fine if parents came late to pick up their children.
Treatments: Control (only record late parents) and treatment (recorded first 4 weeks, then a fine of 10
NIS for late pick-up, removed fine in 17th week).
Subjects: The study was carried out on 10 day-care centers in Israel (center 1-6 in the test group and
center 7-10 in the control group). Between 28 and 37 children in each day care center.
Fehr & Rockenbach (2003,
Nature)
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Setting: A trust game is played anonymously between two individuals (both endowed with
10 MU). The amount sent is tripled. Investors always state desired back-transfer.
Treatments: Trust condition (no fine possible) and incentive condition (4 MU fine if less
than stated back-transfer).
Subjects: 138 subjects.
Mellström & Johannesson (2005)
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Setting: Subjects are given the opportunity to become blood donors (complete a health examination
consisting of a health declaration and a physical examination at a blood donation center). Subjects are
offered different incentive schemes to become a blood donor depending on the experimental treatment.
Treatments: No compensation, 50 SEK compensation, a choice between SEK 50 or donating SEK 50 to
charity.
Subjects: 262 subjects.
Falk & Kosfeld (2006, AER)
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Setting: Principal has zero endowment, agent has 120 MU endowment. Agent choose how much to
transfer to principal knowing that the transer is doubled. The principal has choice whether to restrict the
agents choice set or not. Used strategy method.
Treatments: C5: Principal can impose restriction of at lest 5 MU transfer or choose not to do so. C10:
Same but 10 MU as minimum. C20: Same but 20 MU as minimum.
Subjects: 418 subjects.
Theoretical considerations
• Extrinsic and intrinsic motivation (e.g. Frey and
Oberholzer-Gee 1997): Individuals have an intrinsic value of
performing some activities (e.g. helping others, civic duty) and
external monetary compensation reduce the intrinsic value.
• Incomplete contracts (e.g. Gneezy and Rustichini 2000): The
introduction of a monetary payment changes the perception of
the incomplete contract (the introduction of a fine for coming
late changes the perception of the consequences of frequent
delays).
• Reciprocity (e.g. Fehr & Rockenbach 2003): The introduction
of a fine is viewed as an hostile/unfair act, and is therefore
punished by reduced generosity.
• Signaling: The decision to introduce a fine or incentive signals
some private information on part of the principal. Can
incorporate all of the above explanations.
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b
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e
B&T ’03
Private information about A (or
task).
Imperfect self-knowledge (from private signal): ”I’m not
trusted, so probably I am not trustworthy and won’t
work so hard.”
B&T ’06
No private information.
Private information about own prosociality and greed
with reputational concerns: ”The principal trusted me so
now I can really show off that I am trustworthy rather
than greedy.”
E&J ’06
Private information about own
expectations about A (resulting
from private information about
own characteristics).
Private information about own characteristics and
esteem concerns: ”The principal is not trusting so I
don’t need to work so hard to live up to expectations.”
H ’05
Private signal about A’s type.
Private information about own characteristics
(trustworthy/untrustworthy) and uncontractible part of
relationship: ”He didn’t trust me, so there is no point in
doing something extra outside our contract.”
Bénabou & Tirole (2003, RES)
• A choose e=0 or e=1 at a cost c. Task succeeds with
probability θ if undertaken.
• P knows c, whereas A only gets a signal σ that is
informative about c.
• If task succeeds, A gets V>0 and P gets W>0. If it
fails, both get zero.
• P chooses whether to reward effort with a bonus
b≤W or not.
• If A knew c, he would exert effort only if θ(V+b)≥c.
• With two-sided private information we look for a PBE
of the two-stage game.
Bénabou & Tirole (2003, RES)
• Reminder: A PBE is a strategy profile and
belief system such that strategies are
sequentially rational at each node of the
game tree and beliefs are consistent.
• At the second stage A forms an expectation
E(c|b, σ) and exerts effort only if θ(V+b)≥
E(c|b, σ) which implies that there is a
threshold σ* for the agent to exert effort.
• P choose b in order to maximize expected
payoff: Eσ[UP]= θ[1-G(σ*(b)|c))[W-b].
• Ignoring degenerate equilibria.
Proposition 1 (B&T ’03)
• Bonus is a short term reinforcer: if b2>b1,
then σ*(b1)>σ*(b2).
• Bonus is bad news, if c2>c1 then b2≥b1.
• Bonus undermine A’s perception about task
attractivness: if b1<b2, then E(c|b1, σ) <
E(c|b2, σ).
• Conclusion: Extrinsic motivation can crowd
out intrinsic motivation in the long term.
Bénabou & Tirole (2006, AER)
• P has no private information, only A knows
his identity (ve and vb). A engages in social
signaling.
• Agent effort level e to maximize the
following:
(ve+vbb)e – C(e) + µeE(ve|e,b) – µbE(vb|e,b).
Intrinsic
immaterial
valuation
(prosociality)
Intrinsic
material
valuation
(greed)
Material
cost of
effort
Reputational
effect of
observer’s
expectation of
prosociality
Reputational
effect of
observer’s
expectation of
greed
Bénabou & Tirole (2006, AER)
The first order condition is:
C’(e) = ve+vbb + µe∂E(ve|e,b)/∂e – µb∂E(vb|e,b)/∂e.
1.
2.
Observing e reveals the sum of three marginal
motivations (intrinsic, extrinsic and reputational).
Higher b increases informativeness of vb and
reduces it of ve.
Assume µe and µb are identical and known to all.
vb
b=0
+
Potential
crowding
out!
b>0 without
reputation
b>0 with
reputation
−
C’(e)-r(e,0)=ve*
C’(e)-r(e,b)=ve**
Reputational effects:
1.
New contributors have lower ve which may diminish the
reputational effect of e.
2.
New contributors are greedy, i.e. have higher vb, which
reduces the reputational effect of e.
ve
Bénabou & Tirole (2006, AER)
• Interpretation of Mellström & Johannesson
(2005): Women may not be more prosocial,
but care more about appearing prosocial!
• Argument does not rely on private
information of P, but requries
multidimensional characteristics.
• Implies that P can be replaced by computer
or experimenter (blood donation okay, but
what about workplace relationships?)
Pride and Prejudice (E&J ’06)
• P private information about expectation of A’s type.
• A private information about own type, but cares
intrinsically about P’s expectation (esteem).
Depending on the situation, esteem from P might
depend on P’s type (salience weights).
• Requires heterogeneity among both P and A.
• Heterogeneity of P’s expectations violates the
assumption of common priors.
• So first let us derive these beliefs from common
“metaprior” in a simple two-type case.
Agreeing to Disagree (E&J ’06)
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Two types: θH>θL
Two distributions: P(θH|G)=h>P(θL|B)=l.
Metaprior of θH: h/(h+l)
Prior for distribution of θH type:
P(G|θH)=h/(h+l)>1/2
Prior for distribution of θL type:
P(G|θL) = (1−h) / (2−h−l)<1/2
Calculating the prior for θH given θH and θL shows that a high
type attaches a higher probability to θH than a low type.
Common metapriors and type heterogeneity delivers different
priors
A high type is optimistic, a low type is pessimistic.
Ellingsen & Johannesson (2006)
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Crowding out: High-powered incentives may signal low expectations, implying
that A does not need to work so hard to get P’s esteem. This argument requires
that esteem is worth less from a pessimistic, low type, P.
Gift exchange: If esteem from a high type, optimistic P is worth more to A,
then P may signal he is a high type by paying a higher wage and A will work
harder to get the esteem benefit
Hidden cost of control: Exogenous imposition does not matter (since it does
not carry expectations). However, a controlling P is a relief for A since esteem
becomes cheaper – asymmetric information may consist of different beliefs
about what is appropriate behavior in a situation.
Social salience channel: Similar effects might arise from different views of
what appropriate behavior is. P’s actions might signal what he believes is
appropriate and A will be interested in this because it signals how to achieve
esteem. The above mechanisms can be restated in this way, but it more
generally implies that esteem-seeking agents are sensitive to cues about
appropriate behavior. May explain how different types of rewards (e.g. small
bonus,gold star) can be important, but more generally about framing (PD as
Wall Street Game vs Community Game).
Example: Trust Game (E&J ’06)
Example: Trust Game (E&J ’06)
• Relevant characteristic: Fehr-Schmidt inequality
aversion.
• One equilibrium for “reasonable” parameters: Only
high type P1 are trusting, and high type P2 rewards
trust only in the voluntary trust game.
• Idea: Esteem more valuable from a high type P1 and
it is only in the voluntary trust game that P2 can be
sure that P1 is a high type.
• Key assumption: Low type esteem for P2 be
sufficiently low compared to high type esteem for P2.
Into the future…
• Relation to psychological game theory
• Bounded rationality (e.g. Bayesian
updating)
• More than two players (too complex?)
Bye, bye!
• Framing, social preferences, symbolic
interactionism, meaning et c.