When a Nudge Backfires: Using Observation with Social and Economic Incentives to Promote Pro-Social Behavior

57 Pages Posted: 26 Dec 2018 Last revised: 29 May 2019

See all articles by Gary Bolton

Gary Bolton

University of Texas at Dallas - Naveen Jindal School of Management

Eugen Dimant

University of Pennsylvania, Behavioral Ethics Lab

Ulrich Schmidt

University of Kiel - Institute of Economics

Date Written: May 27, 2019

Abstract

Both theory and recent empirical evidence on nudging suggest that observability of behavior acts as an instrument for promoting (discouraging) pro-social (anti-social) behavior. Our study questions the universality of these claims. We employ a novel four-party setup to disentangle the roles three observational mechanisms play in mediating behavior. We systematically vary the observability of one's actions by others as well as the (non-)monetary relationship between observer and observee. Observability involving economic incentives crowds-out anti-social behavior in favor of more pro-social behavior. Surprisingly, social observation without economic incentives fails to achieve any aggregate pro-social effect, and if anything it backfires. Additional experiments confirm that observability without additional monetary incentives can indeed backfire. However, they also show that the effect of observability on pro-social behavior is increased when social norms are made salient.

Keywords: Anti-Social Behavior, Experiment, Nudge, Pro-Social Behavior, Reputation

JEL Classification: C91, D64, D9

Suggested Citation

Bolton, Gary and Dimant, Eugen and Schmidt, Ulrich, When a Nudge Backfires: Using Observation with Social and Economic Incentives to Promote Pro-Social Behavior (May 27, 2019). Available at SSRN: https://ssrn.com/abstract=3294375 or http://dx.doi.org/10.2139/ssrn.3294375

Gary Bolton

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Eugen Dimant (Contact Author)

University of Pennsylvania, Behavioral Ethics Lab ( email )

Philadelphia, PA 19104
United States

HOME PAGE: http://https://sites.google.com/site/eugendimant/

Ulrich Schmidt

University of Kiel - Institute of Economics ( email )

Olshausenstrasse 40
24098 Kiel, 24098
Germany

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