The Relationship between Money and Cooperation: Evidence from Economics and Psychology

Abstract This paper addresses the non-linear effect that money has on cooperative behavior. In economic theory, money is assumed to have a positive effect on cooperation, by providing incentives to agents. The evidence from field experiments indicates instead that small positive incentives can be detrimental to cooperation, crowding out intrinsic motivation, while larger incentives crowd it back in. The same happens, in the opposite direction, with negative incentives. By reviewing the existing qualitative evidence from economics and psychology, the paper proposes a possible mechanism that can lead to this non-linear effect, based on the methodology and the experimental results from economics and psychology. Money increases mutual benefits but decreases altruism, having a negative effect on cooperation when introduced in lesser amounts.