Social Approval, Competition, and Cooperation

Abstract

Holländer (1990) argued that when non-monetary social approval from peers is sufficiently valuable, it works to promote cooperation. Holländer, however, did not define the characteristics of environments in which high valued approval is likely to occur. This paper provides evidence from a laboratory experiment indicating that people under competition value approval highly, but only when winners earn visible rewards through approval. The evidence implies that approval's value is tied to signaling motives. Our findings point to new institutions that rely on reward, rather than punishment, to efficiently promote generosity in groups.

Keywords: Social approval, cooperation, signaling and competition

JEL Classification: D02, D03, D64, H4