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Krasnow Institute > Monday Seminars > Abstracts Working for Self vs. Working for Others Standard principal-agent theory suggests that monetary incentives are necessary to align the goals of participants to allow them to work together to achieve mutual gains. However, in practice, monetary incentives often seem to create more competitive or selfish behavior by participants. This has led to two different philosophies towards compensating employees. One philosophy strongly supports using monetary incentives, but designing them correctly, while the other philosophy supports team building over monetary incentives. We use experiments to study individuals' willingness to benefit others in environments where work produces mutual gains. In a delayed match to sample task an individual had the opportunity to earn money for correct responses in four conditions. Self is paid, another person, Other, is paid, Both are paid, or Neither is paid. We also vary whether the person is a Stranger or someone they know, i.e., the Friend condition. In the stranger condition, individuals are willing to work as much for strangers as they do for themselves even though they avoid this work in the neither pay condition. However, if the subject must also pay a monetary cost to decide, they stop working for Other even though they continue working for Self. In the Friend condition people work as hard for Friends as they do for Strangers and Self when there is no monetary cost, and they continue working for Friends when there is a monetary cost. However, in the presence of monetary costs, work for Friend increases as the amount that can be earned for Friend increases. One interpretation of these results is that our inherent social incentives are to work for others (who were likely over both evolutionary and developmental time to be friends) and that these incentives are designed to maximize the gains from joint effort. However, the introduction of monetary costs creates a more selfish incentive to simply maximize own returns, or to maximize the reciprocal benefits induced by working for friends.
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