Psychological Sentiments and Economic Behavior.

Abstract

This thesis is a contribution to the field of psychology and economics. The two central themes are gift-giving and the effects of rewards. Within these themes, it studies questions like: Why do people donate to charity funds? Why are people sometimes less motivated when they get rewarded for their behavior? Why does the value of a product increase after they have bought it? And why does the market not completely crowd-out gift-giving? Answers to the above and other questions are given by extending economic models with psychological sentiments. The broad message is that taking such sentiments into account often offers insights into why and how institutions should be designed accordingly. Disregarding these effects leads to unintended consequences of incentive schemes.