Employees are motivated intrinsically as well as extrinsically. Intrinsic motivation is crucial when tacit knowledge in and between teams must be transferred. Organizational forms enable different kinds of motivation and have different capacities to generate and transfer tacit knowledge. Since knowledge generation and transfer are essential for a firm s sustainable competitive advantage, we ask specifically what kinds of motivation are needed to generate and transfer tacit knowledge, as opposed to explicit knowledge.

During the last two decades economists have made much progress in understanding incentives, contracts and organizations. Yet, they constrained their attention to a very narrow and empirically questionable view of human motivation. The purpose of this paper is to show that this narrow view of human motivation may severely limit understanding the determinants and effects of incentives. Economists may fail to understand the levels and the changes in behaviour if they neglect motives like the desire to reciprocate or the desire to avoid social disapproval. We show that monetary incentives may backfire and reduce the performance of agents or their compliance with rules. In addition, these motives may generate very powerful incentives themselves.

Economists usually assume that monetary incentives improve performance, and psychologists claim that the opposite may happen. We present and discuss a set of experiments designed to test these contrasting claims. We found that the effect of monetary compensation on performance was not monotonic. In the treatments in which money was offered, a larger amount yielded a higher performance. However, offering money did not always produce an improvement: subjects who were offered monetary incentives performed more poorly than those who were offered no compensation. Several possible interpretations of the results are discussed. I.

An important question facing experimental economists is whether behavior inside the laboratory is a good indicator of behavior outside the laboratory. We begin with a model that assumes the choices that individuals make depend not just on financial implications, but also on the nature and extent of scrutiny by others, the particular context in which a decision is embedded, and the manner in which participants are selected. To the extent that lab and naturally-occurring environments systematically differ on any of these dimensions, the results obtained inside and outside the lab need not correspond. Based on theory and empirical evidence, we argue that lab experiments are a useful tool for generating qualitative insights, but are not well-suited for obtaining deep structural parameter estimates. We conclude that the sharp dichotomy sometimes drawn between lab experiments and data generated in natural settings is a false one. Each approach has strengths and weaknesses, and a combination of the two is likely to provide deeper insights than either in isolation.

The author is particularly indebted to Jack Knetsch for a number of invaluable comments on the research design. Thanks also go Wulf Gaertner, participants of a seminar in Osnabruck as well as Viv Brown, Maureen Mackintosh, Graham Dawson and Robin Cubitt for related discussions. Much of the theoretical work was done when the author was on sabbatical leave at the London School of Economics – thanks go to Nancy Cartwright, Marco del Seta and Francesco Guala for hospitality and/or discussions of related issues. The usual caveat applies. Some of these findings were discussed as part of a presentation at the Baden IAREP

Abstract. In this paper, we empirically test for the influence of fairness considerations on the willingness to redistribute income in private and in democratic decisions. In contrast to standard explanations of income redistribution, our theory takes into account that prices shift decisively as we move from the sphere of private contributions to politics. At the polls, it is nearly costless to observe social norms. Therefore, we expect individuals to behave more fairly in the political sphere than in the market place. We present experimental evidence which is consistent with this hypothesis. In distributive struggles, social norms moderate the inclination of human beings to behave like ‘gangsters’. 1.

Abstract: In designing public policy it is not enough to consider the possible reaction of individuals to the chosen policy. Public policy may also affect the formation of preferences and norms in a society. The endogenous evolution of preferences, in addition to introducing a conceptual difficulty in evaluating policies, may also eventually affect actual behavior. In order to demonstrate the implications of endogenous preferences on the design of optimal public policy, we present a model in which a subsidy policy is set to encourage contributions towards a public good. However this policy triggers an endogenous preference change that results in a lower level of contribution towards the public good despite the explicit monetary incentives to raise that level.

What determines reciprocity in employment relations? We conducted a controlled eld experiment and tested the extent to which cash and non-monetary gifts affect workers' productivity. Our main nding is that the nature of the gift, not its monetary value, determines the prevalence of reciprocal reactions. A gift in-kind results in a significant and substantial increase in workers ' productivity. An equivalent cash gift, on the other hand, is largely ine ective even though an additional experiment showed that workers would strongly favor the gift's cash equivalent.

1 This paper is based on studies undertaken with my colleagues involved in the dialog associated with siting a high level radioactive waste repository in Nevada as well as related papers on siting locally unwanted land use (LULU) facilities. The ideas also reflect many discussions on siting issues over the

Most scientific inquiries start with a fact, and the study of corruption is no exception. Early work on the topic, mainly by political scientists, found the facts in a mixture of historical accounts, anecdotes, case studies and basic comparative analysis. With few exceptions, however, economists avoided corruption as a subject until Mauro (1995) introduced cross-country data in his study of the effects of corruption on investment. 2 The main views on the topic at the time were in conflict. They ranged from the traditional accounts were corruption acted as a form of confiscation and deterred investment to accounts where corruption was beneficial in providing an informal incentive or bonus scheme for bureaucrats to assist businesses. By showing that the cross-country correlation between corruption and investment was negative, Mauro more or less settled this debate and gave the field the kind of empirical discipline required for fast scientific progress. A mini revolution followed, with economists and political scientists extending the field in different directions, often using data, but also revisiting old questions from new theoretical angles. Clearly a first task was to provide some guidance on the relevance or otherwise of a