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Incentives and Prosocial Behavior

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Author Info
Roland Bénabou
Jean Tirole

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Abstract

We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or image-related) create doubt about the true motive for which good deeds are performed, and this ?overjustification effect? can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify the settings that are conducive to multiple social norms and, more generally, those that make individual actions complements or substitutes, which we show depends on whether stigma or honor is (endogenously) the dominant reputational concern. Finally, we analyze the socially optimal level of incentives and how monopolistic or competitive sponsors depart from it. Sponsor competition is shown to potentially reduce social welfare. (JEL D11, D64, D82, Z13)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 5 (December)
Pages: 1652-1678
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Handle: RePEc:aea:aecrev:v:96:y:2006:i:5:p:1652-1678

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  3. Carrillo, Juan D & Mariotti, Thomas, 2000. "Strategic Ignorance as a Self-Disciplining Device," Review of Economic Studies, Blackwell Publishing, vol. 67(3), pages 529-44, July.
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  5. David Austen-Smith & Roland G. Fryer, 2005. "An Economic Analysis of "Acting White"," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 551-583, May.
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  15. Araújo, Aloísio Pessoa de & Moreira, Humberto Luiz Ataide & Gottlieb, Daniel, 2004. "A model of mixed signals with applications to countersignaling an the GED," Economics Working Papers (Ensaios Economicos da EPGE) 553, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
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  17. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June. [Downloadable!] (restricted)
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  19. Anton Suvorov & Jeroen van de Ven, 2006. "Discretionary Bonuses as a Feedback Mechanism," Working Papers w0088, Center for Economic and Financial Research (CEFIR). [Downloadable!]
  20. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
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