Incentives often distort behavior: they induce agents to exert effort but this effort is not employed optimally. This … paper proposes a theory of incentive design allowing for such distorted behavior. At the heart of the theory is a trade …-off between getting the agent to exert effort and ensuring that this effort is used well. The theory covers various moral …

non-financial incentives and test their effect on effort and performance of students. Our identification strategy exploits … cross-cohort experimental variation in assessment rules and within course variation in incentives to determine their impact … on the performance in exams. We find these incentives to result in an increase in grades of 2.4 marks or about 4%. The …