Can Monetary Incentives Increase UGC Contribution? The Motivation and Competition Crowding Out

Monetary incentives are often introduced by UGC platforms to encourage content contribution, following the conventional economic intuition of “price effect.” However, literature also finds that monetary incentive can negatively affect contribution in prosocial behavior. We build an analytical model to study the impact of monetary incentives on UGC contribution, where contributors are differentiated by their intrinsic motivation and ability to promote their content. Our model offers explanation to the previous “contradictory” results by consider both “motivation crowding out” and “competition crowding out” effects. We find that introducing a small monetary incentive can either increase or reduce the overall content contributed, which exhibits a motivation crowding in or out effect; however, a high enough monetary incentive will increase the overall market contribution. Moreover, monetary incentives do not always enhance the overall quality of contribution. The conditions of the counterintuitive results are analyzed and discussed.