Changing Preferences: An Experiment and Estimation of Market-Incentive Effects on Altruism
AbstractThis paper studies how altruistic preferences are changed by markets and incentives. We conduct a
laboratory experiment in a within-subject design. Subjects are asked to choose health care qualities for hypothetical patients in monopoly, duopoly, and quadropoly. Prices, costs, and patient bene ts are experimental incentive parameters. In monopoly, subjects choose quality to tradeo¤ between pro ts and altruistic patient bene ts. In duopoly and quadropoly, we model subjects playing a simultaneous-move game. Each subject is uncertain about an opponents altruism, and competes for patients by choosing qualities. Bayes-Nash equilibria describe subjectsquality decisions as functions of altruism. Using a nonparametric method, we estimate the population altruism distributions from Bayes-Nash equilibrium qualities in different markets and incentive con gurations. Markets tend to reduce altruism, although duopoly and quadropoly equilibrium qualities are much higher than those in monopoly. Although markets crowd out altruism, the disciplinary powers of market competition are stronger. Counterfactuals con firm markets change preferences.