Competition and Incentives with Motivated Agents

A unifying theme in the literature on organizations such as public bureaucracies and private non-profits is the importance of missions, as opposed to profit, as an organizational goal. Such mission-oriented organizations are frequently staffed by motivated agents who subscribe to the mission. This Paper studies incentives in such contexts and emphasizes the role of matching principals’ and agents’ mission preferences in increasing organizational efficiency and reducing the need for high-powered incentives. The framework developed in this Paper is applied to non-profits, school competition, and incentives in the public sector.