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Relational incentives theory.

Jana Gallus1, Joseph Reiff1, Emir Kamenica2

  • 1UCLA Anderson School of Management.

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|November 2, 2021
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Summary
This summary is machine-generated.

Relational incentives theory explains how incentive schemes must align with relationship structures to maintain effort and relationships. Mismatched incentives can harm coordination but may intentionally shift relational dynamics.

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Area of Science:

  • Social Psychology
  • Behavioral Economics
  • Organizational Behavior

Background:

  • Coordinating efforts with others is fundamental to social life.
  • Incentives are crucial for motivating action and sustaining relationships.
  • Misaligned incentives can negatively impact both effort and relationship quality.

Purpose of the Study:

  • Introduce relational incentives theory, distinguishing incentive schemes from means.
  • Highlight the critical role of incentive schemes in aligning with relational structures.
  • Explore how incentive congruence influences relationships and effort.

Main Methods:

  • Developed relational incentives theory, differentiating incentive schemes (how) and means (what).
  • Proposed four core incentive schemes: participation, hierarchy, balancing, and proportional.
  • Analyzed the congruence between incentive schemes and relational models (communal sharing, authority ranking, equality matching, market pricing).

Main Results:

  • Congruent incentive schemes reinforce relationships and maintain effort.
  • Incongruent incentive schemes disrupt relational motives, reducing effort and undermining relationships.
  • Incongruent incentives can be strategically used to transition between relational models.

Conclusions:

  • Incentive scheme congruence is key to effective coordination and relationship maintenance.
  • Relational incentives theory provides a framework for understanding incentive effects across contexts.
  • The theory offers insights into how relationships are constituted and modulated through incentive design.