DP4633 Incentives and Prosocial Behaviour

Author(s): Roland BĂ©nabou, Jean Tirole
Publication Date: September 2004
Keyword(s): altruism, crowding out, D64, identity, motivation, overjustification effect, reputation, rewards, social norms, Z13
JEL(s): D82, H41
Programme Areas: Public Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4633

We build a theory of prosocial behaviour that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. The presence of rewards or punishments creates doubt as to the true motive for which good deeds are performed, and this ?overjustification effect? can result in a net crowding out of prosocial behaviour by extrinsic incentives. The model also allows us to identify settings that are conducive to multiple social norms of behaviour, and those where disclosing one?s generosity may backfire. Finally, we analyse the equilibrium contracts offered by sponsors, including the level and confidentiality or publicity of incentives. Sponsor competition may cause rewards to bid down rather than up, and can even reduce social welfare by requiring agents to engage in inefficient sacrifices.