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The Hidden Benefits of Control: Evidence from a Natural Field Experiment

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  • Craig E. Landry
  • Andreas Lange
  • John A. List
  • Michael K. Price
  • Nicholas G. Rupp

Abstract

An important dialogue between theorists and experimentalists over the past few decades has raised the study of the interaction of psychological and economic incentives from academic curiosity to a bona fide academic field. One recent area of study within this genre that has sparked interest and debate revolves around the “hidden costs” of conditional incentives. This study overlays randomization on a naturally-occurring environment in a series of temporally-linked field experiments to advance our understanding of the economics of charity and test if such “costs” exist in the field. This approach permits us to examine why people initially give to charities, and what factors keep them committed to the cause. Several key findings emerge. First, there are hidden benefits of conditional incentives that would have gone undetected had we maintained a static theory and an experimental design that focused on short run substitution effects rather than dynamic interactions. Second, we can reject the pure altruism model of giving. Third, we find that public good provision is maximized in both the short and long run by using conditional, rather than unconditional, incentives.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17473.

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Date of creation: Sep 2011
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Handle: RePEc:nbr:nberwo:17473

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References

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  1. Craig E. Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2008. "Is a Donor in Hand Better than Two in the Bush? Evidence from a Natural Field Experiment," NBER Working Papers 14319, National Bureau of Economic Research, Inc.
  2. Sliwka, Dirk, 2006. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," IZA Discussion Papers 2293, Institute for the Study of Labor (IZA).
  3. John List & David Lucking-Reiley, 2002. "The effects of seed money and refunds on charitable giving: Experimental evidence from a university capital campaign," Natural Field Experiments 00301, The Field Experiments Website.
  4. Craig E. Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2011. "Is There a 'Hidden Cost of Control' in Naturally-Occurring Markets? Evidence from a Natural Field Experiment," NBER Working Papers 17472, National Bureau of Economic Research, Inc.
  5. repec:feb:artefa:0093 is not listed on IDEAS
  6. Craig E. Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2006. "Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 747-782, May.
  7. Ernst Fehr & John A. List, 2004. "The Hidden Costs and Returns of Incentives-Trust and Trustworthiness Among CEOs," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 743-771, 09.
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Cited by:
  1. Nava Ashraf & Oriana Bandiera & Kelsey Jack, 2012. "No Margin, no Mission? A Field Experiment on Incentives for public service delivery," STICERD - Economic Organisation and Public Policy Discussion Papers Series 035, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Meer, Jonathan & Rosen, Harvey S., 2012. "Does generosity beget generosity? Alumni giving and undergraduate financial aid," Economics of Education Review, Elsevier, vol. 31(6), pages 890-907.
  3. Craig E. Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2011. "Is There a 'Hidden Cost of Control' in Naturally-Occurring Markets? Evidence from a Natural Field Experiment," NBER Working Papers 17472, National Bureau of Economic Research, Inc.

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