This paper studies the interactions between an individual self-steem and his social environment, whether in the workplace, at school, or in personal relationships. A person generally has only imperfect knowledge of his own ability (or long-term pay) in pursuing a task, and will undertake it only if he has succinct self-confidence. People who interact with him (parent, spouse, friend, teacher, manager, colleague, etc.) often have complementary information about his ability, but also a vested interest in his completing the task. This generates an incentive for such principals to distort their signals so as to manipulate the agent’s self-confidence. We first study situations where an informed principal chooses an incentive structure, such as offering payments or rewards, delegating a task, or simply giving encouragement. We show that rewards may be weak reinforcers in the short term and that, as stressed by psychologists, they may have hidden costs in that they become negative reinforcers once withdrawn. By offering a low–powered incentive scheme, the principal signals that she trusts the agent. Conversely, rewards (extrinsic motivation) have a limited impact on the agent’s current performance, and reduce his intrinsic motivation to undertake similar tasks in the future. Similarly, empowering the agent is likely to increase his motivation and effort, while offers of help or assistance may create dependence. More generally, we identify under which conditions the hidden costs of rewards are a myth or a reality. We then consider the fact that people often criticize or downplay the achievements of their spouse, child, colleague, coauthor, subordinate or teammate. We formalize such situations of ego–bashing, and argue that they may reflect battles for dominance. By lowering the other’s ego, an individual may gain (or regain) real authority within the relationship. Finally, we turn to the case where it is the agent who has superior information, and may attempt to signal it through a variety of self–presentation strategies. In particular, people with low self–esteem often deprecate their own accomplishments in order to obtain leniency (a lowering of expectancies) or a “helping hand?on various obligations. Such strategies are costly: they are met with disapproval, and may back…re if the desired indulgence is denied. We analyze this signaling game, and characterize the levels of self–esteem that give rise to self–deprecation.
