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Changing Preferences: An Experiment and Estimation of Market-Incentive E§ects on Altruism

Undral Byambadalai (), Ching-to Ma () and Daniel Wiesen ()
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Daniel Wiesen: University of Cologne

No WP2019-11, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: This paper studies how altruistic preferences are changed by markets and incentives. We conduct a laboratory experiment in a within-subject design. Subjects are asked to choose health care qualities for hypothetical patients in monopoly, duopoly, and quadropoly. Prices, costs, and patient benefits are experimental incentive parameters. In monopoly, subjects choose quality to tradeoff between profits and altruistic patient benefits. In duopoly and quadropoly, we model subjects playing a simultaneous-move game. Each subject is uncertain about an opponentÌ s altruism, and competes for patients by choosing qualities. Bayes-Nash equilibria describe subjects' quality decisions as functions of altruism. Using a nonparametric method, we estimate the population altruism distributions from Bayes-Nash equilibrium qualities in di§erent markets and incentive conÖgurations. Markets tend to reduce altruism, although duopoly and quadropoly equilibrium qualities are much higher than those in monopoly. Although markets crowd out altruism, the disciplinary powers of market competition are stronger. Counterfactuals confirm markets change preferences.

Keywords: preferences; altruism; markets; incentives (search for similar items in EconPapers)
JEL-codes: C14 C57 C72 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2019-07
New Economics Papers: this item is included in nep-com, nep-exp and nep-gth
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