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From the Price to the Crowding Effect

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  • Bruno S. Frey

Abstract

Crowding-Theory introduces a new psychological effect into economics. Under identifiable conditions, a higher price or stricter regulation reduces the intrinsic motivation to perform a task. Crowding-Out is the only effect which systematically works in the opposite direction to the Relative Price Effect. Crowding-Out Theory is empirically applied to two issues in Switzerland: (1) The support for siting a nuclear waste repository strongly fell when the population was offered a compensation for hosting it. (2) The possibility of direct participation in politics via referenda tends to raise civic virtue, and (ceteris paribus) tax compliance (Crowding-In Effect).

Suggested Citation

  • Bruno S. Frey, 1997. "From the Price to the Crowding Effect," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 133(II), pages 325-350, June.
    • Handle: RePEc:ses:arsjes:1997-ii-12
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    Cited by:

    1. Güth, W., 1997. "Boundedly Rational Decision Emergence -A General Perspective and Some Selective Illustrations-," SFB 373 Discussion Papers 1997,29, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. Guth, Werner, 2000. "Boundedly rational decision emergence - a general perspective and some selective illustrations," Journal of Economic Psychology, Elsevier, vol. 21(4), pages 433-458, August.
    3. Coad, Alex & Binder, Martin, 2014. "Causal linkages between work and life satisfaction and their determinants in a structural VAR approach," Economics Letters, Elsevier, vol. 124(2), pages 263-268.
    4. Neunzig, Alexander R., 2002. "Effiziente Fixlöhne, Arbeitsfreude und Crowding-Effekte," CSLE Discussion Paper Series 2002-03, Saarland University, CSLE - Center for the Study of Law and Economics.

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