The Welfare Effects of Social Recognition: Theory and Evidence from a Field Experiment with the YMCA

A growing body of empirical work shows that social recognition, i.e. the public revelation of individual behavior, can significantly influence individuals' choices. This paper investigates whether social recognition is a socially efficient way to influence individuals' choices. Social recognition is a positional good: not everyone can be at the top, and reductions in privacy can generate both winners and losers. The relative magnitude of such gains and losses determines the overall welfare effect of social recognition nudges. Theoretically, we show that whether social recognition is more efficient than financial incentives depends on whether the shape of the social recognition utility function makes reductions in privacy a positive-sum, negative-sum, or zero-sum game. To quantify the theoretical findings, we report results from a novel field experiment on promoting attendance to the YMCA. We quantify the impact that social recognition has on attendance, as well as elicit people's willingness to pay for social recognition in different future states of the world. We find that social recognition increases YMCA attendance by 23% over a one-month period. We then estimate people's willingness to pay to be recognized at varying levels of attendance, and find that social recognition is a moderately positive-sum game. Unlike previous attempts at evaluating “nudges”, we are able to generate our welfare estimates using non-parametric methods that do not rely on the assumption that individuals hold rational expectations about their future behavior. Our theoretical and empirical framework provides a general template for robustly evaluating the welfare effects of non-financial policy levers.