WILL THERE BE BLOOD? INCENTIVES AND SUBSTITUTION EFFECTS IN PRO-SOCIAL BEHAVIOR*

Abstract

We present evidence from observational data on nearly 14,000 American Red Cross blood drives and from a randomized natural field experiment showing that economic incentives have a positive effect on blood donations without increasing the fraction of donors who come to a drive but are ineligible to donate. We also show that the effect of incentives on donations increases with the incentive’s economic value. However, we further show that a substantial proportion of the increase in donations due to incentives may be explained by donors leaving neighboring drives without incentives to attend the drive with incentives, and the likelihood of this substitution is higher the higher the monetary value of the incentive offered. We conclude that extrinsic incentives stimulate pro-social behavior, but, unless substitution effects are also considered, the effect of incentives may be overestimated.