The price of a price: on the crowding out and in of social norms

We study the impact of financial incentives on social approval, showing that in a society with altruists and egoists, who all care about social approval, introducing financial incentives to agents to contribute to a socially desirable outcome may actually decrease the number of contributions. Withdr...

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Bibliographic Details
Published in:Journal of economic behavior & organization 2004-11, Vol.55 (3), p.377-395
Main Authors: Janssen, Maarten C.W., Mendys-Kamphorst, Ewa
Format: Article
Language:English
Subjects:
Behavior
Economic models
Economic theory
Human behaviour
Incentives
Intrinsic and extrinsic motivation
Monetary incentives
Motivation
Network effects
Networks
Norms
Organization theory
Prices
Social norms
Studies
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Summary:We study the impact of financial incentives on social approval, showing that in a society with altruists and egoists, who all care about social approval, introducing financial incentives to agents to contribute to a socially desirable outcome may actually decrease the number of contributions. Withdrawing the financial incentive does not restore the norm to contribute and may reduce the level of contributions even further. When the norm has disappeared, it may be possible to restore voluntary contributions by first introducing high price and then reducing it, but such an operation is costly and its success uncertain.
ISSN:0167-2681
1879-1751
DOI:10.1016/j.jebo.2002.11.004