Motivation, incentives and contract enforcement

Economics is a science about human behavior, and incentives are at the very heart of it. An incentive is any factor that motivates a particular action, or counts as a reason for preferring one choice to the alternatives. In the standard economic approach to incentives, humans are motivated by money alone, and incentive contracts are perfectly enforced by legal courts. This approach, summarized in the comprehensive book by Dewatripont and Bolton (2005), has turned out to be very fruitful as it helps us for mulate precise hypotheses about optimal incentives in various situations. But in the last decades the profession has also gained insights from law, political science, sociology and psychology and learned that people?s preferences, and the institutions tha t surrounds them, are more complicated ? and less well-defined - than what the simplest models of homo economicus prescribe. In this research project I will develop theoretical models where I analyze the provision and/or effect of incentives in situatio ns where humans are motivated by more than money and/or legal institutions are imperfect. The project is organized in four sub-projects: Sub-project 1: The tenuous relationship between effort and incentives Conjecture: Higher bonuses in the incentive co ntracts may be associated with lower probability for enforcement. This may lead to a negative relationship between effort and incentives. Sub-project 2: The tenuous relationship between crime and punishment Conjecture: Higher punishment levels may lead criminals to spend more resources on hiding their criminal activity, which in turn may lead to weaker enforcement and more crime. Sub-project 3: Credible reciprocity People who are trustworthy because of reciprocal preferences can reveal egoists that i mitiate reciprocity. Sub-project 4: Incentives to motivate Conjecture: Motivators can spend an inefficiently high amount of effort trying to motivate people with non-monetary rewards.