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Business norm versus norm-nudge as a contract-enforcing mechanism: Evidence from a real marketplace

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  • Bhattacharya, Haimanti
  • Dugar, Subhasish

Abstract

We design a natural field experiment to examine the impacts of norm-based interventions in enhancing honesty in a large decentralized marketplace fraught with contractual breaches owing to individual dishonesty. Sellers in fish markets of Kolkata, India, frequently cheat on the weight of the fish purchased via bilateral bargaining over price. We approach this marketplace and make two interventions: triggering a business norm driven by sellers’ adherence to a superstitious belief and enacting a norm-nudge in the form of moral suasion. Our design exploits a within-seller design whereby experimenter-buyers make scripted one-time purchases. We discover that the sellers behave strikingly honestly when the superstitious business norm is made salient. In contrast, moral suasion significantly decreases dishonesty, but its effect is markedly weaker than the superstition-based business norm. Our results suggest that direct normative appeals have the potential to make substantial headway to mitigate fraud in credence good markets where fraud is hard to detect due to information asymmetry.

Suggested Citation

  • Bhattacharya, Haimanti & Dugar, Subhasish, 2022. "Business norm versus norm-nudge as a contract-enforcing mechanism: Evidence from a real marketplace," European Economic Review, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:eecrev:v:144:y:2022:i:c:s0014292122000277
    DOI: 10.1016/j.euroecorev.2022.104078
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    More about this item

    Keywords

    Norm-nudge; Moral suasion; Superstition; Cheating; Field experiment;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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