Intrinsic and Extrinsic Motivation

Transcription

1 Intrinsic and Extrinsic Motivation Roland Bénabou Jean Tirole. Review of Economic Studies 2003 Bénabou and Tirole Intrinsic and Extrinsic Motivation 1 / 30

2 Motivation Should a child be rewarded for passing an exam, or paid to read a book? What impact do empowerment and monitoring have on employees morale and productivity? Does receiving help boost or hurt self-esteem? Why do incentives work well in some contexts, but appear counter productive in others? Why do people sometimes undermine the self-confidence of others on whose effort and initiative they depend? Bénabou and Tirole Intrinsic and Extrinsic Motivation 2 / 30

3 The Daycare Experiment (Gneezy and Rustichini 2000) 10 day care centres observed over 20 weeks in Haifa, Israel. Fines introduced for parents who picked up their kids late. Weeks 1 4: no fines. Weeks 5 6: Treatment Group: 6 centres Fine of NIS 10 per late arrival. Control Group: 4 centres No fine. Week 7 onwards: fines withdrawn. Turns out fines are counter-productive: parents come late more often! Bénabou and Tirole Intrinsic and Extrinsic Motivation 3 / 30

4 The Daycare Experiment (Gneezy and Rustichini 2000) Bénabou and Tirole Intrinsic and Extrinsic Motivation 4 / 30

5 This paper These questions are studied from a unifying perspective, emphasizing the interplay between an individual s personal motivation and his social environment. They model the interactions between an agent with imperfect self-knowledge and an informed principal who chooses an incentive structure: Offering rewards and threatening punishments Delegating a task Giving encouragement, praise, or criticism. Bénabou and Tirole Intrinsic and Extrinsic Motivation 5 / 30

6 This paper Analyse the hidden costs" of rewards and punishments from an economic and cognitive perspective. In many instances, incentives work quite effectively. So we need to understand in what cases they should be used with caution. To clarify when extrinsic motivation (contingent rewards) should be expected to crowd out" or crowd in" intrinsic motivation (the individual s desire to perform the task for its own sake). Bénabou and Tirole Intrinsic and Extrinsic Motivation 6 / 30

7 The Problem An agent (he): faces uncertainty about his payoff from taking a particular action. Ability Specific task at hand (long-run return, how difficult or enjoyable it is to complete, etc.) He undertakes the task only if he has sufficient confidence in his own ability to succeed, and in the project s net return. He receives signals about the attractiveness or unpleasantness of the task. A principal (she) has complementary private information about the task or the agent s prospects from it. She has a vested interest in (derives a benefit from) the agent s undertaking and succeeding in the activity. Hence, she has strong incentives to manipulate. Bénabou and Tirole Intrinsic and Extrinsic Motivation 7 / 30

8 The Looking-Glass Self The agent takes the principal s perspective in order to learn about himself. He attempts to infer her private information from her decision. The influence of the principal s decision on the agent s behaviour is twofold: Direct: Through its impact on the agent s payoff from accomplishing the task (keeping information constant) Indirect: Through his inference process. Bénabou and Tirole Intrinsic and Extrinsic Motivation 8 / 30

9 The Looking-Glass Self The agent chooses a continuous action (effort level) e: impacts both. The principal knows β: Difficulty of the task or the agent s ability. β affects the agent s payoffs from e. She selects a policy p prior to the agent s choice of action. The agent receives a signal σ that is informative about β. β is sufficient statistic for (β, σ). Agent s payoff: U A (β, e, p) Principal s payoff: U P (β, e, p) Bénabou and Tirole Intrinsic and Extrinsic Motivation 9 / 30

10 Timing Stage 1: The principal learns the parameter β and selects a policy p. Stage 2: After observing p and learning σ, the agent chooses an action e. Bénabou and Tirole Intrinsic and Extrinsic Motivation 10 / 30

11 The Looking-Glass Self The agent s optimal action e depends on p and on his conditional expectation ˆβ(σ, p). The conditioning of ˆβ(σ, p) on p is the looking-glass-self" phenomenon. Why? The agent tries to see through the principal s ulterior motives that led to p being selected. Bénabou and Tirole Intrinsic and Extrinsic Motivation 11 / 30

12 The Principal s problem The principal s expected payoff from choosing a policy p when she has information β is The principal s choice of policy E σ [U P (β, e (p, ˆβ(σ, p), p) β] [ UP E σ p + U P e e p + U P e e ˆβ ˆβ ] p β = 0 U P : Direct effect of p on the principal s payoff p U P e : Direct impact of p on the agent s behaviour. e p Bénabou and Tirole Intrinsic and Extrinsic Motivation 12 / 30

13 Confidence-Management Motive U P e [ UP E σ p + U P e e p + U P e ˆβ ] e ˆβ p β = 0 e ˆβ : Confidence-Management Motive. ˆβ p The agent updates his beliefs in reaction to the choice of p: ( ˆβ p ). The principal must then take into account how the agent s interpretation of her choice will affect his self-confidence that is, his perceived prospects from undertaking the task. U P e Important issue: e ˆβ > 0 - Meaning? U P e e ˆβ < 0 Bénabou and Tirole Intrinsic and Extrinsic Motivation 13 / 30

14 The Model - Cost of Effort is Unknown Agent s unobservable effort e {0, 1}. Cost = c. Probability of success if agent spends effort is θ (0, 1] : common knowledge. Cost of effort c [c, c]. Principal learns c. Agent knows that c is drawn from a cumulative dist. F(c) with a density f(c). He gets a a noisy signal σ [0, 1]. A higher signal is a good news, in the sense of Monotone Likelihood Ratio Property for all σ 1 and σ 2 with σ 1 > σ 2, g(σ 1 c) g(σ 2 c) is decreasing in c. If the task is succesfully completed, principal gets W and agent gets V (intrinsic motivation). The principal can also offer a bonus b 0 for succesful task completion. Bénabou and Tirole Intrinsic and Extrinsic Motivation 14 / 30

15 Equilibrium When offered a reward b, the agent updates his belief about c using the principal s equilibrium strategy. ĉ(σ, b) = E[c σ, b] : Agent s expectation of the cost, conditional on his signal and the reward he is offered. Agent s utility: U A = [θ(v + b) ĉ(σ, b)]e e = 1: ĉ(σ, b) θ(v + b) iff σ σ (b). Principal chooses b to maximize E σ [U P ] = θ[1 G(σ (b) c)][w b] Bénabou and Tirole Intrinsic and Extrinsic Motivation 15 / 30

16 Equilibrium Rewards are positive short-term reinforcers: if b 1 < b 2 then σ (b 1 ) > σ (b 2 ). Why? If this inequality did not hold the principal could, regardless of her information about c, (weakly) increase the likelihood of effort while offering the lower wage. Therefore, b 2 could not be an equilibrium offer. Bénabou and Tirole Intrinsic and Extrinsic Motivation 16 / 30

17 Equilibrium Rewards are bad news, in that a confident principal offers a lower wage or bonus: if b 1 is a reward offered when the principal knows the task s difficulty to be c 1, and b 2 is offered when she knows it to be c 2 > c 1, then b 2 b 1. Suppose, b i is optimal given c i and σ i = σ (b i ). Revealed Preference: θ[1 G(σ i c i )][W b i ] θ[1 G(σ j c i )][W b j ] 1 G(σ 1 c 1 ) 1 G(σ 2 c 1 ) W b 2 1 G(σ 1 c 2 ) W b 1 1 G(σ 2 c 2 ) Since c 2 > c 1 MLRP requires σ 1 σ 2. Hence, b 1 b 2 since σ ( ) is decreasing. Bénabou and Tirole Intrinsic and Extrinsic Motivation 17 / 30

18 Equilibrium The previous result says If the principal offers b 1 to types [c 1, c 1 ] and b 2 > b 1 to types [c 2, c 2 ], it must be that c 1 c 2. Implication? Rewards undermine the agent s assessment of the task s attractiveness: for all (σ 1, σ 2 ) and all equilibrium rewards b 1 < b 2, E[c σ 1, b 1 ] < E[c σ 2, b 2 ] Future assessments of task attractiveness are also always reduced by an increase in the reward: the expectation of c conditional on σ, b, the action and the outcome is decreasing in b regardless of σ, the action and the outcome. Bénabou and Tirole Intrinsic and Extrinsic Motivation 18 / 30

19 Implications Forbidden Fruit: A higher reward is, in equilibrium, associated with a less attractive task; therefore, bonuses (or higher wages when effort is observable) reduce intrinsic motivation. Conversely, forbidden fruits" are the most appealing. Immediate Re-engagement Effects: The information conveyed by incentives on one task (say, math homework) spills over to correlatedtasks (physics homework). The threat of punishmentthen has a positive (short term) reinforcement effect in instances when the agent knows that monitoring is effective, but only a negative one when he thinks that he can get away with it". Bénabou and Tirole Intrinsic and Extrinsic Motivation 19 / 30

20 The Model - Probability of Success is Unknown Agent s unobservable effort e {0, 1}. Cost = c. Probability of success if agent spends effort is θ {θ H, θ L }, and 0 otherwise. α = Pr(θ H ) is the agent s initial self-confidence. Principal learns θ, agent gets a noisy signal σ. Signal distribution: g H (σ) and g L (σ), with g H g L increasing in σ (Monotone Likelihood Ratio Property). If the task is succesfully completed, principal gets W and agent gets V (intrinsic motivation). The principal can also offer a bonus b 0 for succesful task completion (no flat wage). Bénabou and Tirole Intrinsic and Extrinsic Motivation 20 / 30

21 Assumptions Agent has enough intrinsic motivation to work in H state but not in L state: θ L V < c < θ H V Principal has enough stake in the outcome to offer a bonus in the L state: W > c θ L V = b Agent suffers from a lack of confidence (will not spend effort without additional information/incentive): α < c θ LV (θ H θ L )V. Bénabou and Tirole Intrinsic and Extrinsic Motivation 21 / 30

22 Equilibrium We will ignore participation constraints. Full information world: Principal offers a bonus of 0 to H and b to L. This is not a PBE under incomplete information, because the principal will always want to pose as H. One PBE (semi-separating). Principal s strategy: When H offers 0 When L offers 0 with probability x and b with probability 1 x Agent s strategy: If b = b work hard If b = 0 work hard iff σ σ. Bénabou and Tirole Intrinsic and Extrinsic Motivation 22 / 30

23 Equilibrium Have to find equilibrium values for x and σ. Exploit principal s and agent s indifference conditions. If π is agent s posterior on H, he is indifferent between e = 0 and e = 1 under no bonus iff By Bayes rule: [πθ H +(1 π)θ L ]V = c π = c θ LV (θ H θ L )V αg H (σ ) π = αg H (σ )+(1 α)x g L (σ ) 1 = 1+ 1 α where R(σ) = g L(σ) α x R(σ g ) H (σ). (1) Bénabou and Tirole Intrinsic and Extrinsic Motivation 23 / 30

24 Equilibrium Principal s indifference condition: indifferent between offering bonus and not when L. [1 G L (σ )]W = W b or G L (σ ) = c θ LV θ L W (2) (1) and (2) define x and σ. This is the unique PBE satisfying the NWBR property of Cho and Kreps (slightly stronger version of the Intuitive Criterion). Bénabou and Tirole Intrinsic and Extrinsic Motivation 24 / 30

25 Equilibrium Properties Trust effect: when θ = θ H, the principal strictly prefers to show confidence in the agent by offering no bonus. Very likely the agent will receive good news (high realization of σ) about his productivity and will work hard anyway. The bonus is an additional source of information to the agent apart from his signal. A bonus offer is bad news. Role of assumption: It is necessary that the agent gets an independent, noisy signal of his productivity. It is necessary that the agent has some intrinsic motivation. Bénabou and Tirole Intrinsic and Extrinsic Motivation 25 / 30

26 Equilibrium Properties Inefficiency: In a first-best world, it is always effcient to spend effort. Under incomplete information, sometimes e = 0 even though θ = θ H. Agent may work less hard when productivity is high! Usual conflict between profit maximization and efficiency. A utilitarian planner would like to commit to the following policy: offer bonus b iff θ = θ L. Selection vs incentive effect: Promise of a bonus (probabilistically) increases effort, but in equilibrium, bonus may be correlated with failure, because they are offered when chances of success are low. Bénabou and Tirole Intrinsic and Extrinsic Motivation 26 / 30

27 Equilibrium Properties Self Confidence and Trust: The principal trusts the agent more often the higher is his initial self-confidence. From (1), 1 α α x is a constant in equilibrium (given other parameters). When α, we must have x to preserve the constancy. The ex-ante probability of no-bonus, α+(1 α)x also as α. Short vs Long Run Effects of incentives: While b is in effect, the agent works harder. But the bonus undermines his self-confidence and leads to lower effort when it is withdrawn. Bénabou and Tirole Intrinsic and Extrinsic Motivation 27 / 30

28 Flat Wages Contracts of the form (a, b), where a = (unconditional) wage, b = (conditional) bonus. The following is a PBE. Principal s strategy: a L = 0, b L = b = c θ L V a H = c θ L V, b H = b = 0 Agent s beliefs: for any other contract, believe θ = θ L with probability 1. Accept either contract and choose e = 1. This is the only equilibrium that satisfies the refinement, NWBR property. Bénabou and Tirole Intrinsic and Extrinsic Motivation 28 / 30

29 Verifying Equilibrium Principal s IC when θ = θ H θ H (W b H ) a H θ H (W b L ) a L Principal s IC when θ = θ L θ L (W b L ) a L θ L (W b H ) a H Replacing the values and combining inequalities: θ L ( c θ L V) c θ L V θ H ( c θ L V) This is always true. The agent s IC is trivially satisfied. Bénabou and Tirole Intrinsic and Extrinsic Motivation 29 / 30

30 Equilibrium Properties Offering a bonus is more costly than offering flat wages when chance of success is high. Therefore, flat wage is a credible signal of productivity. Information is fully revealed and efficiency is restored. Unlike in standard moral hazard models, unconditional rewards can boost morale and encourage hard work. The bonus has similar properties as before: Signals bad news Encourages effort, if information were held constant Negatively correlated with productivity/performance Dampens effort and productivity in the long run. Bénabou and Tirole Intrinsic and Extrinsic Motivation 30 / 30