Abstract
The design of effective incentive schemes that are both successful in motivating employees and keeping down costs is of critical importance. Research has demonstrated that prosocial incentives, where individuals’ effort benefits a charitable organization, can sometimes be more effective than standard monetary incentives. However, most research has focused on the intensive margin, examining effort conditional on participation in the activity. We examine the effectiveness of standard and prosocial incentives on the extensive margin, corresponding to people’s decisions to opt-in to an incentivized activity. In addition, we test the effectiveness of optional prosocial incentives, where individuals can choose between keeping or donating all or part of their payment. Across four experiments that vary the type and size of incentives, we find that individuals are more likely to avoid activities that involve any prosocial incentive. Our results highlight the importance of considering the margin of decisions when designing incentive schemes.
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