Incentives, self-selection, and coordination of motivated agents for the production of social goods

Abstract

We study, theoretically and empirically, the effect of incentives on the self-selection and coordination of motivated agents to produce “social” goods in the presence of positive effort complementarities. Theory predicts that lowering incentives increases social-good production via the self-selection and coordination of motivated agents into low-incentive work environments. We test this prediction in a novel lab experiment that allows us to isolate the effect of self-selection cleanly. Results show that social-good production more than doubles if incentives are low, but only if self-selection is possible. The analysis identifies a crucial role of incentives in the matching and coordination of motivated agents.