INTERNATIONAL ECONOMIC REVIEW

Osaka University
Institute of Social and Economic Research
6-1 Mihogaoka, Ibaraki, Osaka 567-0047 JAPAN



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2011
Lawrence R. Klein Lecture
at Osaka University


Professor Ernst Fehr
(University of Zurich)

The Lure of Authority: Motivation and Incentive Effects of Power

Power and authority permeate political, social, and economic life but there is still little empirical knowledge about the motivational origins and consequences of authority.@ In this paper, we examine the motivation and incentive effects of authority experimentally by studying behavior in an authority delegation game. We observe a strong tendency to retain authority even when its delegation is in individualsf material interest, suggesting that individuals have nonpecuniary motives for keeping authority. Moreover, this tendency to hold onto authority strongly increases with individualsf degree of regret aversion, suggesting that reference-dependent regret motives are a key force behind the revealed preference for authority. Finally, authority leads to a substantial over-provision of effort by the controlling party while a substantial minority of subordinates underprovide effort despite pecuniary incentives to the contrary. Thus, authority has important motivational consequences that exacerbate the inefficiencies arising from suboptimal delegation choices.

Thursday, July 7, 2011
4:00-6:00 PM
ISER, Annex 2F Seminar Room

The Klein Lecture was established in 1997 in honor of Professor Lawrence R. Klein, who was awarded the Nobel Prize in Economics in 1980. He is one of the founders of the International Economic Review. Each year, one of the world's most distinguished economists is invited to give a lecture at either the University of Pennsylvania or Osaka University, and the presented paper is subsequently published in the I.E.R.


Klein lecture 1999
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Klein lecture 2005
Klein lecture 2014
Klein lecture 2017
INTERNATIONAL ECONOMIC REVIEW