Principals can attempt to get agents to perform certain actions preferable to the principal by using ex-post punishments or rewards to align incentives. Field data is mixed on whether, and to what extent, such informal incentive contracting crowds out efficient solutions to the agency problem....

During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically questionable view of human motivation. The purpose of this paper is to show that this narrow view of...