MOTIVATION AS A LIMIT TO PRICING

A monetary reward offered by a principal tends to crowd out an agent's willingness to perform the task for its own sake (i.e. based on intrinsic motivation) if the agent's sense of recognition, fairness, or self-determination are thereby negatively affected. The crowding-out effect of pricing may also spill over into sectors where no pricing is applied (spillover effect) if the persons affected find it costly to dinstinguish their motivations according to sectors. Motivation crowding-out and spillover narrow the scope for successfully applying monetary rewards. These theoretical claims are supported by real-life observations for environmental policy and blood donations.