Economics at your fingertips  

A note on optimal incentives with state-dependent preferences

Sung-Ha Hwang and Samuel Bowles ()
Additional contact information
Samuel Bowles: Santa Fe Institute, U.S.A. and Dipartimento di Economia Politica, Univerity of Siena, Italy

No 1118, Working Papers from Research Institute for Market Economy, Sogang University

Abstract: In both experimental and natural settings incentives sometimes under-perform, generating smaller e ects on the targeted behaviors than would be predicted for entirely self-regarding agents. A parsimonious explanation is that incentives that appeal to payo maximizing mo- tives may crowd out non-economic motives such as altruism, reciprocity, intrinsic motivation and other social preferences, leading to disappointing and sometimes even counter-productive incentive e ects. Evidence from behavioral experiments indicates that crowding may take two forms: categorical (the e ect on preferences depends only on the presence or absence of the incentive) or marginal (the e ect depends on the extent of the incentive). We extend an earlier contribution to this journal (Bowles and Hwang, 2008) providing a more general framework for the study of optimal incentives when crowding out results from framing and information e ects including (with evidence for ) categorical crowding, and as a result, an expanded range of situations for which the sophisticated planner will make greater use of incentives when incentives crowd out social preferences than when motivational crowding is absent.

Keywords: Social preferences; public goods; motivational crowding out; explicit incentives; framing; endogenuous preferences (search for similar items in EconPapers)
JEL-codes: D64 H41 D78 D03 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-evo and nep-exp
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) First version, 2011 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers from Research Institute for Market Economy, Sogang University Contact information at EDIRC.
Bibliographic data for series maintained by Jung Hur ().

Page updated 2019-10-11
Handle: RePEc:sgo:wpaper:1118