Nederlandse Organisatie voor Wetenschappelijk Onderzoek (NWO)
The objective of this project is to reconcile the eonomic view and the psychological view on human behaviour. A theory will be developed which unifies the two approaches. Since empirical support appears to exist for both approaches, it is important to determine the conditions under which intrinsic motivation, extrinsic motivation , or both are relevant for human behaviour. In addition, the theory should clarify the interrelationship between intrinsic motivation and extrinsic rewards. While economists have generally come to the conclusion that extrinsic rewards are effective, empirical research by psychologists suggests that extrinsic rewards are sometimes counterproductive because they crowd-out intrinsic motivation. Conditions will be derived under which extrinsic rewards are likely to crowd-out intrinsic motivation. The theoretical work will be accompanied by empirical analyses. While the project is inspired by the insights from and the findings in the psychology literature, the project adopts the researchmethodology of economics. Thus, theoretical models will be developed wherein individuals maximize a well-defined objective function subject to some constraints. In dynamic settings, we will assume that individuals are forward-looking: they form expectations about the future which are consistent with the underlying model. Of course, this does not mean that individuals are always completely informed or that they perfectly foresee the future .4 On the contrary, incomplete information and uncertainty about future events will play a major role in the project, as in many modem economic analyses. In contrast to what is common in economics, a broad view on people's motivations will be adopted. In the economists' jargon: the arguments in the utility function will not be restricted to consumption and leisure.