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Bénabou, R. J. M., Tirole, J. (2006). Incentives and Prosocial Behavior. American Economic Review 96 (5), 1652-1678

We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or image-related) create doubt about the true motive for which good deeds are performed, and this overjustification effect can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives. We also identify the settings that are conducive to multiple social norms and, more generally, those that make individual actions complements or substitutes, which we show depends on whether stigma or honor is (endogenously) the dominant reputational concern. Finally, we analyze the socially optimal level of incentives and how monopolistic or competitive sponsors depart from it. Sponsor competition is shown to potentially reduce social welfare.

Authors

Bénabou, Roland J. M.

Roland Bénabou joined the faculty of Princeton University in 1999 and holds a joint appointment in the Department of Economics and the Woodrow Wilson School of Public and International Affairs. Bénabou’s research spans both macroeconomic and microeconomic areas, such as the...

Tirole, Jean

Jean Tirole is Scientific Director of IDEI, Member of the Toulouse School of Economics (TSE), Ingénieur général des Ponts et Chaussées and Chairman of the Board of Directors, Toulouse School of Economics.

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