Abstract: Sustainable investing is widespread, yet investors' motives are not well understood. Are they driven by a desire to generate environmental impact (impact preferences) or by a preference to invest in firms that share their values (value alignment)? To distinguish these motives, I conduct an experiment with U.S. investors, eliciting their willingness to pay for investments in firms that vary only in environmental impact. The experimental design varies (i) participants' pivotality in changing the firm’s externalities and (ii) the firm’s current level of externalities. These variations allow me to distinguish impact preferences from value alignment, and to examine whether participants value a firm’s current level of externalities independently of the investment impact. My main finding is that for investments that generate the same positive impact, participants prefer those that help firms transition from negative to positive externalities. Structural estimates indicate that this behavioral pattern is driven by two forces: an asymmetry in how participants value positive versus negative externalities, and diminishing sensitivity to externality size. Contrary to previous evidence, participants are motivated primarily by impact preferences rather than value alignment.

Abstract: We analyze the equilibrium of a bilateral bargaining game (Nash, 1953), where at least one of the individuals has a preference for morality (homo moralis). We show that the equilibrium set crucially depends on these moral preferences. Furthermore, our comparative static analyses provide insights into the distributional implications of individuals’ moral concerns and the composition of society. A comparison of the set of equilibria in our model with those under selfish preferences, Kantian equilibrium, fairness preferences, altruistic preferences, and inequality averse preferences reveals important differences.

Abstract: Recent studies show that individuals’ decisions are shaped by their perceptions of socially appropriate behavior. However, these studies elicit such perceptions without developing a theory of how individuals determine social appropriateness. This paper proposes a framework in which social appropriateness judgments emerge endogenously from a utility function that combines payoff maximization with universalization reasoning. The framework allows one to compute the social appropriateness of any action without relying on beliefs, preferences, or choices. I test the theory’s predictions using evidence from past studies and new data from a laboratory experiment.

Abstract: The sustainability of cooperation is crucial for understanding the progress of societies. We study a repeated game in which individuals decide what share of their income to transfer to other group members. A central feature of our model is that individuals may, with some probability, switch incomes across periods—our measure of income mobility—while the overall income distribution remains constant. We analyze how income mobility and income inequality affect the sustainability of contribution norms—informal agreements about how much each member should transfer to the group. We find that greater income mobility facilitates cooperation. In contrast, the effect of inequality is ambiguous and depends on the progressivity of the contribution norm and the degree of mobility. We apply our framework to an optimal taxation problem to examine the interaction between public and private redistribution. 

Abstract: Rejections of positive offers in the Ultimatum Game have been attributed to different motivations. We show that a model combining social preferences and moral concerns provides a unifying explanation for these rejections while accounting for additional evidence. Under the preferences considered, a positive degree of spite is a necessary and sufficient condition for rejecting positive offers. This indicates that social preferences, rather than moral concerns, drive rejection behavior. This does not imply that moral concerns do not matter. We show that rejection thresholds increase with individuals’ moral concerns, suggesting that morality acts as an amplifier of social preferences. Using data from van Leeuwen and Alger (2024), we estimate individuals’ social preferences and moral concerns using a finite mixture approach. Consistent with previous evidence, we identify two types of individuals who reject positive offers in the Ultimatum Game, but that differ in their Dictator Game behavior.