How social preferences provide effort incentives in situations of financial support

PLoS One. 2021 Jan 28;16(1):e0244972. doi: 10.1371/journal.pone.0244972. eCollection 2021.

Abstract

When people anticipate financial support, they may reduce preventive effort. We conjecture that the source of financial support can mitigate this moral hazard effect due to social preferences. We compare effort choices when another individual voluntarily provides financial support against effort choices under purely monetary incentives. When financial support is provided voluntarily by another individual, we expect recipients to exert more effort to avoid bad outcomes (level effect) and to reduce effort provision to a lesser degree as financial support becomes more generous (sensitivity effect). We conducted an incentivized laboratory experiment and find some evidence for the level effect and strong evidence for the sensitivity effect. This leads to significant gains in material efficiency with expected wealth being 5.5% higher and 37.3% less volatile.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Altruism
  • Financial Support*
  • Humans
  • Models, Theoretical
  • Motivation*
  • Probability
  • Risk-Taking
  • Social Behavior*

Associated data

  • figshare/10.6084/m9.figshare.13238297

Grants and funding

The authors (CK, SN & RP) acknowledge financial support from the “Deutscher Verein für Versicherungswissenschaft (DVfVW) e.V.” (www.dvfvw.de). There is no grant number. The funder had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.