Working for the “warm glow”: On the benefits and limits of prosocial incentives

We study whether using prosocial incentives, where effort is tied directly to charitable contributions, may lead to better performance than standard incentive schemes. In a real-effort task, individuals indeed work harder for charity than for themselves, but only when incentive stakes are low. When stakes are raised, effort increases when individuals work for themselves but not when they work for others and, as a result, the difference in provided effort disappears. Individuals correctly anticipate these effects, choosing to work for charity at low incentives and for themselves at high incentives. The results are consistent with warm glow giving and have implications for optimal incentive design.