The Lure of Authority: Motivation and Incentive Effects of Power

ERNST FEHR, HOLGER HERZ, TOM WILKENING
THE AMERICAN ECONOMIC REVIEW 103.4 (2013): 1325-1359

Abstract: Authority and power permeate political, social, and economic life, but empirical knowledge about the motivational origins and consequences of authority is limited. The authors study the motivation and incentive effects of authority experimentally in an authority-delegation game. Individuals often retain authority even when its delegation is in their material interest—suggesting that authority has nonpecuniary consequences for utility. Authority also leads to overprovision of effort by the controlling parties, while a large percentage of subordinates underprovide effort despite pecuniary incentives to the contrary. Authority thus has important motivational consequences that exacerbate the inefficiencies arising from suboptimal delegation choices.