Changing preferences: an experiment and estimation of market-incentive effects on altruism
Files
Accepted manuscript
Date
2023-12
Authors
Byambadalai, Undral
Ma, Ching-To Albert
Wiesen, Daniel
Version
Accepted manuscript
OA Version
Citation
U. Byambadalai, C.-T.A. Ma, D. Wiesen. 2023. "Changing preferences: An experiment and estimation of market-incentive effects on altruism." Journal of Health Economics, Volume 92, pp.102808-. https://doi.org/10.1016/j.jhealeco.2023.102808
Abstract
This paper studies how altruistic preferences are changed by markets and incentives. We conduct a laboratory experiment with a within-subject design. Subjects are asked to choose health care qualities for hypothetical patients in monopoly, duopoly, and quadropoly. Prices, costs, and patient benefits are experimental incentive parameters. In monopoly, subjects choose quality by trading off between profits and altruistic patient benefits. In duopoly and quadropoly, subjects play a simultaneous-move game. Uncertain about an opponent's altruism, each subject competes for patients by choosing qualities. Bayes-Nash equilibria describe subjects' quality 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 configurations. Competition tends to reduce altruism, but duopoly and quadropoly equilibrium qualities are much higher than monopoly. Although markets crowd out altruism, the disciplinary powers of market competition are stronger. Counterfactuals confirm markets change preferences.