Price and Prejudice: An Empirical Test of Financial Incentives, Altruism, and Racial Bias

Many argue that paying people for good behavior can crowd out beneficial motivations like altruism. But little is known about how financial incentives interact with harmful motivations like racial bias. Two randomized vignette studies test how financial incentives affect bias. The first experiment varies the race of a hypothetical patient in need of a kidney transplant (black or white), an incentive ($18,500 or none), and addition of a message appealing to altruism. Incentives encouraged donation but introduced a significant bias favoring white patients. The second experiment assesses willingness to donate to a patient (black or white) without an incentive and then introduces incentives varying in size ($3,000, $18,800, or $50,000) and source (charity, government, or patient’s own funds). Incentives encouraged donation but were significantly more effective in encouraging donation to white patients. Biasing effects are most pronounced for medium-sized incentives. Incentives may have an inadvertent biasing effect for altruistic behavior.