Economic Incentives and Social Preferences: Causal Evidence of Non-Separability

Marco Faravelli and Luca Stanca

No 250, Working Papers from University of Milano-Bicocca, Department of Economics

Abstract: This paper provides a direct test of the hypothesis that agents' objective functions are non-separable in economic incentives and social preferences. We study experimentally fixed-prize contests using a 2x2 design, varying orthogonally the degree of competition of the incentive mechanism (all-pay auction vs. lottery) and the presence or absence of social returns to bidding (rent seeking vs. public good). The results indicate that either stronger competition or positive social returns have positive main effects on bids. In addition, we find a negative interaction between the all-pay auction mechanism and the public good environment, leading us to reject separability. This finding provides causal evidence that economic incentives may negatively affect pro-social behavior.

Keywords: Contests; Public goods; Rent-seeking; Social preferences; Separability; Laboratory experiments (search for similar items in EconPapers)
JEL-codes: C91 D44 H41 (search for similar items in EconPapers)
Pages: 32
Date: 2013-07, Revised 2013-07
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-hrm, nep-pbe and nep-pol
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http://repec.dems.unimib.it/repec/pdf/mibwpaper250.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: Economic incentives and social preferences: Causal evidence of non-separability (2014)
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