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Optimal Incentives on Multiple Prosocial Activities when Reputation Matters

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  • Francisco Candel‐Sánchez
  • Juan Perote‐Peña

Abstract

In this paper, we present a signaling model in which individuals engage in socially beneficial but costly activities in order to convey information about their willingness to cooperate with other agents. When several activities are available, the inclusion of monetary compensations in any one of them affects the relative costs of undertaking each activity and, therefore, their informative value for agents. We find the subsidies that maximize social welfare, which are shown to depend critically on the reputation gained from each activity. Finally, we use comparative statics analysis to study the effects on optimal subsidies of changes in their determinants.

Suggested Citation

  • Francisco Candel‐Sánchez & Juan Perote‐Peña, 2020. "Optimal Incentives on Multiple Prosocial Activities when Reputation Matters," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(3), pages 1207-1230, July.
    • Handle: RePEc:bla:scandj:v:122:y:2020:i:3:p:1207-1230
    DOI: 10.1111/sjoe.12369
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