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Changing preferences: An experiment and estimation of market-incentive effects on altruism

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  • Byambadalai, Undral
  • Ma, Ching-to Albert
  • Wiesen, Daniel

Abstract

This paper studies how altruistic preferences are changed by markets and incentives. We conduct a laboratory experiment with a within-subject design. Subjects are asked to choose health care qualities for hypothetical patients in monopoly, duopoly, and quadropoly. Prices, costs, and patient benefits are experimental incentive parameters. In monopoly, subjects choose quality by trading off between profits and altruistic patient benefits. In duopoly and quadropoly, subjects play a simultaneous-move game. Uncertain about an opponent’s altruism, each subject competes for patients by choosing qualities. Bayes-Nash equilibria describe subjects’ quality decisions as functions of altruism. Using a nonparametric method, we estimate the population altruism distributions from Bayes-Nash equilibrium qualities in different markets and incentive configurations. Competition tends to reduce altruism, but duopoly and quadropoly equilibrium qualities are much higher than monopoly. Although markets crowd out altruism, the disciplinary powers of market competition are stronger. Counterfactuals confirm markets change preferences.

Suggested Citation

  • Byambadalai, Undral & Ma, Ching-to Albert & Wiesen, Daniel, 2023. "Changing preferences: An experiment and estimation of market-incentive effects on altruism," Journal of Health Economics, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:jhecon:v:92:y:2023:i:c:s0167629623000851
    DOI: 10.1016/j.jhealeco.2023.102808
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    Cited by:

    1. Bardey, David & De Donder , Philippe & Zaporozhets , Vera, 2024. "Economic Incentives to Develop and to Use Diagnostic Tests a Literature Review," Documentos CEDE 21024, Universidad de los Andes, Facultad de Economía, CEDE.
    2. De Donder, Philippe & Bardey, David & Zaporozhets, Vera, 2024. "Economic Incentives to Develop and to Use Diagnostic Tests - A Literature Review," TSE Working Papers 24-1507, Toulouse School of Economics (TSE).

    More about this item

    Keywords

    Preferences; Altruism; Markets; Incentives;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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