DP2579 Self-Confidence & Social Interactions

Author(s): Roland Bénabou , Jean Tirole

Publication Date: October 2000

Keyword(s): Self-Confidence , Self-Presentation , Motivation , Rewards , Incentives , Standards , Signalling , Psychology and Economics

JEL(s): A12 , C70 , D10 , D60 , J22 , J24 , J53

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP2579.asp

This paper studies the interactions between an individual's self-esteem and his social environment - in the workplace, at school, and in personal relationships. Because a person generally has only imperfect knowledge of his own abilities, people who derive benefits from his performance (parent, spouse, friend, teacher, manager, etc.) have incentives to manipulate his self--confidence. We first study situations where an informed principal chooses an incentive structure, such as offering payments or rewards, delegating a task, or giving encouragement. We show that extrinsic rewards may have hidden costs - as stressed by psychologists - in that they undermine intrinsic motivation. As a result, they may be only weak reinforcers in the short run, and become negative reinforcers once withdrawn. Similarly, empowerment is likely to increase motivation, while offers of help may create a dependence. More generally, we identify when the hidden costs of rewards are a myth or a reality. We next consider situations where people criticize or downplay the performance of their spouse, child, colleague, or subordinate. We formalize ego-bashing as reflecting battles for dominance or authority within the relationship. Finally, we turn to the self-presentation strategies of privately informed agents. We study in particular how depressed individuals may engage in self-deprecation as a way of seeking leniency (a lowering of expectancies) or a ‘helping hand’ on various obligations.