This paper experimentally examines image motivation--the desire to be liked and well regarded by others--as a driver in prosocial behavior (doing good), and asks whether extrinsic monetary incentives (doing well) have a detrimental effect on prosocial behavior due to crowding out of image motivation. Using the unique property of image motivation--its dependency on visibility--we show that image is indeed an important part of the motivation to behave prosocially, and that extrinsic incentives crowd out image motivation. Therefore, monetary incentives are more likely to be counterproductive for public prosocial activities than for private ones. (JEL D64, L31, Z13)

No abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. We examine the impact of relative wages on labor supply in a laboratory experiment. We test the hypothesis that, ceteris paribus, making a given wage high ðlowÞ relative to other wage levels will lead to an increase ðdecreaseÞ in labor supply. We find that labor supply does respond significantly to relative pay, and in the expected direction. However, when a strong enough reason for the relative low pay is given, this difference disappears.

Optimism-bias is inconsistent with the independence of decision weights and payo¤s found in models of choice under risk, such as expected utility theory and prospect theory. Hence, to explain the evidence suggesting that agents are optimistically biased, we propose an alternative model of risky choice, a¤ective decision-making, where decision weights-which we label a¤ective or perceived risk-are endogenized. A¤ective decision making (ADM) is a strategic model of choice under risk, where we posit two cognitive processes: the "rational" and the "emotional" processes. The two processes interact in a simultaneous-move intrapersonal potential game, and observed choice is the result of a pure strategy Nash equilibrium in this potential game. We show that regular ADM potential games have an odd number of locally unique pure strategy Nash equilibria, and demonstrate this …nding for a¤ective decision making in insurance markets. We prove that ADM potential games are refutable, by axiomatizing the ADM potential maximizers.

JEL classification: D01 D81 G22 Keywords:Affective expected utility Optimism bias Demand for insurance Optimism bias is inconsistent with the independence of decision weights and payoffs found in models of choice under risk and uncertainty, such as expected utility theory, subjective expected utility, and prospect theory. We therefore propose an alternative model of risky and uncertain choice where decision weights-affective or perceived risk-are endogenous. Affective decision making (ADM) is a strategic model of choice under risk and uncertainty where we posit two cognitive processes-the "rational" and the "emotional" process. The two processes interact in a simultaneous-move intrapersonal potential game, and observed choice is the result of a pure strategy Nash equilibrium in this game. We show that regular ADM potential games have an odd number of locally unique pure strategy Nash equilibria, and demonstrate this finding for affective decision making in insurance markets. We prove that ADM potential games are refutable by axiomatizing the ADM potential maximizers.