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

How social preferences provide effort incentives in situations of financial support

Christian Knoller  1 , Stefan Neuß  1 , Richard Peter  2
Affiliations

How social preferences provide effort incentives in situations of financial support

Christian Knoller et al. PLoS One. .

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.

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Conflict of interest statement

The authors have declared that no competing interests exist.

Figures

Fig 1
Fig 1. Effort provision as a function of financial support for different intensities of social preferences α.
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