Motivation

I am trying to square the invitation to reciprocate in, for example, the Gift Exchange Game described in Camerer and Fehr at p. 63, with the Crowding-Out theory we discussed last week. The basic question is when and how much especially generous wage offers to supply a given level of effort can crowd out natural (altruistic) motivations to supply that effort. I’ve thought of a variation on Jolls’s babysitter example to test one instinct.

Here is the arrangement: Parent offers babysitter wage w, which is roughly the lowest wage babysitter would accept to do the promised work. Additionally, parent offers to pay premium z upon return if babysitter agrees not to shirk his responsibilities. Parent conditions payment of z on reporting: parent will ask babysitter at the end of the night whether he shirked his responsibilities. If babysitter claims not to have shirked, then he will receive w + z, but if he admits to shirking, he will receive only w.

This arrangement is very similar to Jolls’s example, which David helpfully describes below. In both examples, the parent offers a “fair” premium for nothing more than the services sought and available at w. In both cases, parents rely on reciprocity norms and trust where monitoring is infeasible.

Does it make any difference that in my hypothetical the premium is candidly described as payment for doing precisely what the babysitter would already do for w? Does the end-of-night inquisition change things? Perhaps Frey and Jegen would say yes: Babysitter could shirk at w or w + z without penalty, and thus the decision to do the promised level of work is, in homo economicus’s, mind, altruistic and irrational. Offering w + z signals trust and invites reciprocation for fairness sake, but perhaps offering premium z only after inquisition crowds-out whatever motivation might come from fairness concerns. In my example, z may be like payment for donating blood: some (most?) babysitters are naturally inclined to provide the promised level of service regardless of payment.

If crowding-out is likely in my hypothetical, what stops it from occurring in Jolls’s? Perhaps Deci and Ryan can provide some guidance–Is it the sense of competence and autonomy that comes with a higher wage and no monitoring? Does trust fulfill our basic need for a sense relatedness, which is injured by the inquisition?

This isn’t meant to be an argument, since I’m not sure whether my hypothetical changes things at all. But the relationship between premium wages for services and crowding-out is at least worth pondering.