Long-lasting effects of incentives and social preference: A public goods experiment.

ABSTRACT

This paper addresses the question of the effectiveness and permanence of temporary incentives to contribute to a public good. Using a common experimental framework, we investigate the effects of a recommendation that takes the form of an exhortative message to contribute, a monetary punishment and a non-monetary reward to sustain high levels of contributions. In particular, we shed light on the differential impact these mechanisms have on heterogeneous types of agents. The results show that all three incentives increase contributions compared to a pre-phase where there is no incentive. Monetary sanctions lead to the highest contributions, but a sudden drop in contributions is observed once the incentive to punish is removed. On the contrary, Recommendation leads to the lowest contributions but maintains a long-lasting impact in the Post-policy phase. In particular, it makes free-riders increase their contribution over time in the post-incentive phase. Finally, non-monetary reward backfires against those who are weakly conditional cooperators. Our findings emphasize the importance of designing and maintaining incentives not only for free-riders, but for strong and weak conditional cooperators as well, depending on characteristics of the incentives.