Cheap signaling of altruism

Abstract

Decisions on whether to engage in a pro-social act can separate altruistic from non-altruistic individuals. We explore the role of the probability that the pro-social action has to be carried out after publicly deciding in favor of it. In such a signaling environment, a lower probability that the act has to be carried out cheapens the signal. We use a model to predict how this cheapness influences decision-making behavior and the updating of beliefs about the decision-maker’s level of altruism. In a laboratory experiment, we test the model’s predictions by varying the probability that the pro-social decision has to be carried out and the strength of image concerns. If the image concern is non-monetary, the experimental data reveals that, in line with the model’s predictions, the share of pro-social decisions increases in the case of cheaper signals. The prediction that the effect of the cheapness increases with image concerns cannot be confirmed by the data. Belief-updating is a crucial element of modeling pro-social decision-making in signaling environments, as it provides the trade-off between costs and image benefits. However, the experimental data does not show significant belief-updating differences depending on the cheapness of the signal after observing a pro-social decision.