Seminar by Simone Tonin

SALA SEMINARI - AULA DELLA SCUOLA DI DOTTORATO - PALAZZO CA' BORIN - VIA DEL SANTO 22 - ORE 12.30

08.01.2019

Seminar by Simone Tonin, Durham University

Title: "Incentives with Motivated Agents having Reference-Dependent Preferences", joint with Mauro Bambi.

Abstract: In this paper we study a principal-agent problem where the agent has reference-dependent preferences and the principal can change agent's reference points throughout managerial practices. We consider a model where the agent needs to perform two different tasks and the principal uses the reference points to influence the way in which the effort is allocated between them. Monetary incentives have a secondary role as we consider motivated agents, ``i.e., agents who pursue goals because they perceive intrinsic benefits from doing so" (Besley and Ghatak, 2005). The main objective of the paper is to analyse the effect of changing the reference points on the welfare of the agents. Perhaps surprisingly, we show that in some cases reference points can be used to improve the agent's welfare and to maximise the principal payoff.