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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. (JEL D11, D64, D82, Z13)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.5.1652
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 5 (December)
Pages: 1652-1678

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Handle: RePEc:aea:aecrev:v:96:y:2006:i:5:p:1652-1678

Note: DOI: 10.1257/aer.96.5.1652
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Find related papers by JEL classification:

• D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
• H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

References

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1. One Nation: some scepticism
   by chris dillow in Stumbling and Mumbling on 2012-10-03 12:13:20
2. Caution when applying impact evaluation lessons across contexts: the case of financial incentives for health workers
   by Jed Friedman in Development Impact on 2013-04-10 18:25:54

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