Incentives for Prosocial Behavior: The Role of Reputations

by Christine L. Exley

Executive Summary — This study documents how small monetary incentives discourage volunteering when they are public and thus introduce a “greedy” signal. The discouragement from this greedy signal, however, is less pronounced among volunteers with public reputations, or those who are likely known not to be too greedy.

Author Abstract

Do monetary incentives encourage volunteering? Or, do they introduce a "greedy" signal and hence crowd out the motivation to volunteer? Since the strength of this greedy signal is normally unobserved, the answer is theoretically unclear, and corresponding empirical evidence is mixed. I overcome this ambiguity by examining individuals for whom the greedy signal strength is likely weak—those with public reputations about their past volunteer behavior. In a laboratory experiment, I show that crowd out in response to public incentives is much less likely among those with public, as opposed to private, reputations.

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