The Hidden Benefits of Control: Evidence from a Natural Field Experiment

44 Pages Posted: 5 Sep 2011

See all articles by Craig E. Landry

Craig E. Landry

UGA Ag & Applied Economics

Andreas Lange

University of Hamburg

John A. List

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Michael K. Price

University of Nevada, Reno

Nicholas G. Rupp

East Carolina University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 5, 2011

Abstract

An important dialogue between theorists and experimentalists over the past few decades has raised the study of the interaction of psychological and economic incentives from academic curiosity to a bona fide academic field. One recent area of study within this genre that has sparked interest and debate revolves around the “hidden costs” of certain incentives, such as a principal not exercising control over an agent. While the literature highlights the importance of such effects, what has been missing is clean evidence from the field to support such claims. This study overlays randomization on a naturally-occurring environment in a series of temporally-linked field experiments to advance our understanding of the economics of charity and to test if such benefits exist in the field. This approach permits us to examine why people initially give to charities, and what factors keep them committed to the cause. Several key findings emerge. First, there are hidden benefits of conditional incentives that would have gone undetected had we maintained a static theory and an experimental design that focused on short run substitution effects rather than dynamic interactions. Second, we can reject the pure altruism model of giving. Third, we find that public good provision is maximized in both the short and long run by using conditional, rather than unconditional, incentives.

Keywords: public goods, field experiments, charitable fund-raising, reciprocity

JEL Classification: C93, H41, L30

Suggested Citation

Landry, Craig and Lange, Andreas and List, John A. and Price, Michael K. and Rupp, Nicholas G., The Hidden Benefits of Control: Evidence from a Natural Field Experiment (July 5, 2011). Available at SSRN: https://ssrn.com/abstract=1922771 or http://dx.doi.org/10.2139/ssrn.1922771

Craig Landry (Contact Author)

UGA Ag & Applied Economics ( email )

Athens, GA 30602-7509
United States

Andreas Lange

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

John A. List

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael K. Price

University of Nevada, Reno ( email )

1664 N. Virginia St
Reno, NV 89557
United States

Nicholas G. Rupp

East Carolina University - Department of Economics ( email )

Brewster Building
Greenville, NC 27858
United States
252.328.6821 (Phone)
252.328.6743 (Fax)

HOME PAGE: http://myweb.ecu.edu/ruppn/

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