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Economic Incentives and Social Preferences: Causal Evidence of Non-Separability

  • Marco Faravelli
  • Luca Stanca

This paper provides a direct test of the hypothesis that agents' objective functions are non-separable in economic incentives and social preferences. We study experimentally fixed-prize contests using a 2x2 design, varying orthogonally the degree of competition of the incentive mechanism (all-pay auction vs. lottery) and the presence or absence of social returns to bidding (rent seeking vs. public good). The results indicate that either stronger competition or positive social returns have positive main effects on bids. In addition, we find a negative interaction between the all-pay auction mechanism and the public good environment, leading us to reject separability. This finding provides causal evidence that economic incentives may negatively affect pro-social behavior.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper250.pdf
File Function: First version, 2013
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 250.

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Length: 32
Date of creation: Jul 2013
Date of revision: Jul 2013
Handle: RePEc:mib:wpaper:250
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  15. Dechenaux, Emmanuel & Kovenock, Dan & Sheremeta, Roman M., 2012. "A survey of experimental research on contests, all-pay auctions and tournaments," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2012-109, Social Science Research Center Berlin (WZB).
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  21. John Duffy & Alexander Matros, 2011. "All-Pay Auctions vs. Lotteries as Provisional Fixed-Prize Fundraising Mechanisms," Working Papers 448, University of Pittsburgh, Department of Economics, revised Jul 2013.
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