Money Given Away is More Valuable

Across various disciplines, research has analyzed the effectiveness of self-focused vs. other-focused (prosocial) bonuses in influencing individual behavior. The effectiveness of prosocial bonuses has been linked to the “warm glow” of giving, which suggests that people experience positive feelings from the act of “doing good”. We propose an additional motivation for why prosocial bonuses might influence behaviors, suggesting that peoples’ value perceptions differ depending on whether an equivalent bonus is spent on others or on oneself. Two laboratory experiments show that individuals overvalue other-focused compared to self-focused bonuses. These results have implications for the design of incentive schemes.