Incentives and Prosocial Behavior

Author:

Bénabou Roland1,Tirole Jean2

Affiliation:

1. Department of Economics and Woodrow Wilson School, Princeton University, Princeton, NJ 08544, Canadian Institute for Advanced Research, Centre for Economic Policy Research, Institute for the Study of Labor, and National Bureau for Economic Research.

2. Institut d'Economie Industrielle, 21 Allées de Brienne, 31000 Toulouse, France, Groupe de Recherche en Économic Mathématique et Quantitative, Centre d'Enseignement et de Recherche en Analyse Socioéconomique, and Massachusetts Institute of Technology.

Abstract

We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or image-related) create doubt about the true motive for which good deeds are performed, and this “overjustification effect” can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify the settings that are conducive to multiple social norms and, more generally, those that make individual actions complements or substitutes, which we show depends on whether stigma or honor is (endogenously) the dominant reputational concern. Finally, we analyze the socially optimal level of incentives and how monopolistic or competitive sponsors depart from it. Sponsor competition is shown to potentially reduce social welfare.

Publisher

American Economic Association

Subject

Economics and Econometrics

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