Self‐regulation through Goal Setting*

Goals are an important motivator. But little is known about why and how people set them. We address this issue in a model based on two stylized facts. First, goals serve as reference points for performance. Second, present‐biased preferences create self‐control problems. We show the power and limits of self‐regulation through goals. Goals increase an individual's motivation—but only up to a certain point. Furthermore, they are painful self‐disciplining devices. Thus, greater self‐control problems may result in tougher goals; but for a severe present bias goals either lack a motivating force, or are too painful to be accepted.     

Welfare implications of strategic economic policy in eastern Europe

This paper evaluates the welfare effects in a block of selected eastern European countries (Bulgaria, Romania, former Czechoslovakia, Hungary, Poland, and former Yugoslavia) emerging from the possibility to participate in the European integration process and to act as strategic players in dynamic games. The results of the cooperative and noncooperative dynamic game scenarios are compared with fixed policy solutions. The McKibbin-Sachs global model (MSG2 model), which incorporates rational expectations, is used as a framework. A global supply-side shock and a fixed exchange rate regime are considered under the alternative policy layouts. It is shown that international economic cooperation may be advantageous over noncooperation. For the anchor currency of the European Monetary Union (EMU), fixing the eastern European block currencies to the EMU may lead to significant destabilization.     

Mixed up? that’s good for motivation

We show that career concerns can arise in the absence of ex ante uncertainty about an agent’s type, if his unobservable actions influence future productivity. Implementing effort in mixed strategies allows the principal to endogenously introduce uncertainty about the agent’s ex post productivity and generate reputational incentives. Creating such ambiguity can be optimal for the principal, even though this exposes the agent to additional risk and reduces output. This finding for an environment with imperfect commitment contrasts with standard agency models, where implementing mixed strategy actions typically is not optimal if pure strategies can also be implemented.