Principal-Agent Relation in the Organization for Gratuitous Services

Because there is no profit incentive, the organizations for gratuitous services are generally considered having serious incentive difficulty, but most of which have the same efficiency as for-profit-enterprises. This implied that, except profits, many other incentive mechanisms are also important. "Output benchmark" and "self-incentive" are main incentives in the organizations for gratuitous services. The paper analyzes these two incentive mechanisms using principal-agent model and indicates that "the long term benefit" and "altruism" can produce strong incentive to the agents, but the existence of the uncertainty weakens their incentive effects.