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Games 2017, 8(3), 37; https://doi.org/10.3390/g8030037

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

Toulouse School of Economics, 21 Allee de Brienne, MF 003, Toulouse 31000, France
Received: 28 July 2017 / Revised: 27 August 2017 / Accepted: 30 August 2017 / Published: 5 September 2017
(This article belongs to the Special Issue Ethics, Morality, and Game Theory)
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Abstract

This paper studies incentives provision when agents are characterized either by homo moralis preferences, i.e., their utility is represented by a convex combination of selfish preferences and Kantian morality, or by altruism. In a moral hazard in a team 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 sufficiently high; and either the outside option for the agents is zero or the degree of morality is sufficiently low. View Full-Text
Keywords: moral hazard in teams; optimal contracts; homo moralis preferences; altruism moral hazard in teams; optimal contracts; homo moralis preferences; altruism
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Sarkisian, R. Team Incentives under Moral and Altruistic Preferences: Which Team to Choose? Games 2017, 8, 37.

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