Does Money Talk? The Impact of Monetary Incentives on User-Generated Content Contributions

Many platforms use monetary incentives to encourage user-generated content (UGC) contributions. The empirical evidence, however, is contradictory: monetary incentives are shown to either increase or decrease contribution. We make the first attempt to build a unified theoretical model to understand the complex nature of the impact of monetary incentives. We consider contributors differentiated not only by their attitudes toward monetary incentives but also by their effectiveness to attract audience. We identify two scenarios where contributors can be crowded out when monetary incentives are present: (1) when a small amount of monetary incentive is introduced, the non–money-driven contributors reduce or even stop contributing (motivation crowding out); or (2) when the monetary incentive is relatively large, the high-effectiveness contributors crowd out the low-effectiveness ones (competition crowding out). As a result, an increase in the monetary incentive can either increase or decrease contributors’ participation and the total content volume contributed. Our results offer guidelines for different UGC platforms to design monetary incentive mechanisms.