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Title:Another hidden cost of incentives: The detrimental effect on norm enforcement PDF Logo
Authors:Fuster, Andreas
Meier, Stephan
Issue Date:2009
Series/Report no.:Working paper series // Federal Reserve Bank of Boston 09-2
Abstract:Monetary incentives are often considered as a way to foster contributions to public goods in society and firms. This paper investigates experimentally the effect of monetary incentives in the presence of a norm enforcement mechanism. Norm enforcement through peer punishment has been shown to be effective in raising contributions by itself. We test whether and how monetary incentives interact with punishment and how this in turn affects contributions. Our main findings are that free riders are punished less harshly in the treatment with incentives, and as a consequence, average contributions to the public good are no higher than without incentives. This finding ties to and extends previous research on settings in which monetary incentives may fail to have the desired effect.
Subjects:public goods
experimental economics
norm enforcement
hidden costs of incentives
JEL:C72
C92
D23
H41
Document Type:Working Paper
Appears in Collections:Working Paper Series, Federal Reserve Bank of Boston

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