Mixed Duopoly with Motivated Teachers

I study the self-selection of motivated teachers between public and private schools in a mixed duopoly environment. The quality is influenced by the effort exerted by the teachers. Teachers' motivation may have a positive impact on the levels of effort and, then, on the quality. The effect of motivation strictly depends on the degree of differentiation of the programs offered by the two schools. When both schools offer similar programs, the Nash equilibrium is the one in which both schools hire motivated teachers. This is because teachers' motivation plays an important role in the students' choice between the two schools. In contrast, when the two schools offer significantly different programs, the Nash equilibrium is the one in which both schools hire selfish teachers. Hiring motivated teachers would hurt schools' profits and benefit students. However, the former effect dominates the latter.