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Optimal Incentives on Multiple Prosocial Activities when Reputation Matters *
Author(s) -
CandelSánchez Francisco,
PerotePeña Juan
Publication year - 2020
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12369
Subject(s) - prosocial behavior , comparative statics , subsidy , reputation , economics , incentive , microeconomics , value (mathematics) , order (exchange) , welfare , public economics , social welfare , social psychology , market economy , psychology , computer science , social science , finance , machine learning , sociology , political science , law
Abstract In this paper, we present a signaling model in which individuals engage in socially beneficial but costly activities in order to convey information about their willingness to cooperate with other agents. When several activities are available, the inclusion of monetary compensations in any one of them affects the relative costs of undertaking each activity and, therefore, their informative value for agents. We find the subsidies that maximize social welfare, which are shown to depend critically on the reputation gained from each activity. Finally, we use comparative statics analysis to study the effects on optimal subsidies of changes in their determinants.