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The Misperception of Norms: The Psychology of Bias and the Economics of Equilibrium

Author

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  • Cooter Robert D

    (UC Berkeley)

  • Feldman Michal

    (Hebrew University of Jerusalem)

  • Feldman Yuval

    (Bar-Ilan University)

Abstract

This study combines the psychology of bias and the economics of equilibrium. We focus on two of the most discussed perceptual biases found by psychologists who studied the role social norms in ethical decision making. First, psychologists found a general tendency of people to over-estimate how many other people engage in unethical behavior. We show that this bias causes more people to violate the norm than if the bias were corrected. Second, psychologists found a general tendency of a person to over-estimate how many other people act the same as he does. We show that this bias does not change the number of people who violate the norm, contrary to the predictions of some psychologists. When a person suffers from both biases, they can augment or undermine each other. In either case, we show that supplying accurate information will cause more people to conform to the norm. In general, we show that applying the equilibrium concept to psychological studies improves public policy recommendations by increasing precision in predicting aggregate behavior over time.

Suggested Citation

  • Cooter Robert D & Feldman Michal & Feldman Yuval, 2008. "The Misperception of Norms: The Psychology of Bias and the Economics of Equilibrium," Review of Law & Economics, De Gruyter, vol. 4(3), pages 889-911, December.
    • Handle: RePEc:bpj:rlecon:v:4:y:2008:i:3:n:7
    DOI: 10.2202/1555-5879.1222
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    References listed on IDEAS

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    Cited by:

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    2. Jinyi Kuang & Erik Thulin & Sania Ashraf & Alex Shpenev & Upasak Das & Maryann G Delea & Peter McNally & Cristina Bicchieri, 2020. "Bias in the perceived prevalence of open defecation: Evidence from Bihar, India," PLOS ONE, Public Library of Science, vol. 15(9), pages 1-10, September.
    3. Daniel L. Chen & Susan Yeh, 2023. "How do rights revolutions occur? Free speech and the first amendment," Working Papers hal-03921964, HAL.
    4. Aliaksandr Amialchuk & Olugbenga Ajilore & Kevin Egan, 2019. "The influence of misperceptions about social norms on substance use among school‐aged adolescents," Health Economics, John Wiley & Sons, Ltd., vol. 28(6), pages 736-747, June.
    5. Prinz, Aloys & Muehlbacher, Stephan & Kirchler, Erich, 2014. "The slippery slope framework on tax compliance: An attempt to formalization," Journal of Economic Psychology, Elsevier, vol. 40(C), pages 20-34.
    6. Chen, Daniel L. & Yeh, Susan, 2022. "How do rights revolutions occur? Free speech and the first amendment," TSE Working Papers 22-1396, Toulouse School of Economics (TSE).
    7. Timo Tammi, 2011. "Contractual preferences and moral biases: social identity and procedural fairness in the exclusion game experiment," Constitutional Political Economy, Springer, vol. 22(4), pages 373-397, December.
    8. Aliaksandr Amialchuk & Mir M. Ali, 2024. "The long-term effects of marijuana use on mental health outcomes," Review of Economics of the Household, Springer, vol. 22(3), pages 1127-1145, September.
    9. Aliaksandr Amialchuk & Onur Sapci, 2021. "The influence of normative misperceptions on alcohol-related problems among school-age adolescents in the U.S," Review of Economics of the Household, Springer, vol. 19(2), pages 453-472, June.
    10. Chen, Daniel L. & Yeh, Susan, 2016. "How Do Rights Revolutions Occur? Free Speech and the First Amendment," IAST Working Papers 16-51, Institute for Advanced Study in Toulouse (IAST).
    11. Damiani, Genaro Martín, 2024. "Indirect tax evasion, shadow economy, and the Laffer curve: A theoretical approach," MPRA Paper 121779, University Library of Munich, Germany.

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