Incentives and Prosocial Behavior

46 Pages Posted: 5 Feb 2005

See all articles by Roland Bénabou

Roland Bénabou

Princeton University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI); University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ); Centre for Economic Policy Research (CEPR)

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Abstract

We build a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. The presence of rewards or punishments creates doubt as to the true motive for which good deeds are performed, and this "overjustification effect" can result in a net crowding out of prosocial behavior by extrinsic incentives. The model also allows us to identify settings that are conducive to multiple social norms of behavior, and those where disclosing one's generosity may backfire. Finally, we analyze the equilibrium contracts offered by sponsors, including the level and confidentiality or publicity of incentives. Sponsor competition may cause rewards to bid down rather than up, and can even reduce social welfare by requiring agents to engage in inefficient sacrifices.

Keywords: Altruism, rewards, motivation, overjustification effect, crowding out, identity, social

JEL Classification: D64, D82, H41, Z13

Suggested Citation

Bénabou, Roland and Tirole, Jean, Incentives and Prosocial Behavior. IZA Discussion Paper No. 1695; Princeton Economics Discussion Paper No. 230, Available at SSRN: https://ssrn.com/abstract=639043 or http://dx.doi.org/10.2139/ssrn.639043

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