OPTIMAL INCENTIVES WITH STATE-DEPENDENT PREFERENCES

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In both experimental and natural settings, incentives sometimes underperform, generating smaller effects on the targeted behaviors than would be predicted for entirely self-regarding agents. A parsimonious explanation is that incentives that appeal to self-regarding economic motives may crowd out noneconomic motives such as altruism, reciprocity, intrinsic motivation, ethical values, and other social preferences, leading to disappointing and sometimes even counterproductive incentive effects. We present evidence from behavioral experiments that crowding may take two forms: categorical (the effect on preferences depends only on the presence or absence of the incentive) or marginal (the effect depends on the extent of the incentive). We extend an earlier contribution (Bowles and Hwang, 2008) to include categorical crowding, thus providing a more general framework for the study of optimal incentives and as a result, an expanded range of situations for which the sophisticated planner will (surprisingly) make greater use of incentives when incentives crowd out social preferences than when motivational crowding is absent.
Publisher
WILEY-BLACKWELL
Issue Date
2014-10
Language
English
Article Type
Article
Keywords

SOCIAL PREFERENCES; BEHAVIOR

Citation

JOURNAL OF PUBLIC ECONOMIC THEORY, v.16, no.5, pp.681 - 705

ISSN
1097-3923
DOI
10.1111/jpet.12077
URI
http://hdl.handle.net/10203/219694
Appears in Collection
MT-Journal Papers(저널논문)
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