IDEAS home Printed from https://ideas.repec.org/a/eee/irlaec/v38y2014icp48-57.html
   My bibliography  Save this article

How laws affect behavior: Obligations, incentives and cooperative behavior

Author

Listed:
  • Galbiati, Roberto
  • Vertova, Pietro

Abstract

Laws and other formal rules are ‘obligations backed by incentives’. In this paper we explore how formal rules affect cooperative behavior. Our analysis is based on a series of experimental public good games designed to isolate the impact of exogenously requested minimum contributions (obligations) from those of the marginal incentives backing them. We find that obligations have a sizeable effect on cooperative behavior even in the absence of incentives. When non-binding incentives are introduced, requested contributions strongly sustain cooperation. Therefore, in contrast with cases in which incentives crowd-out cooperative behavior, in our experiments obligations and incentives are complementary, jointly supporting high levels of contributions. Moreover, we find that variations in obligations affect behavior even when incentives are held constant. Finally, we explore the behavioral channels of the previous results, finding that people's beliefs about others’ contributions and the willingness to cooperate are both called into play.

Suggested Citation

  • Galbiati, Roberto & Vertova, Pietro, 2014. "How laws affect behavior: Obligations, incentives and cooperative behavior," International Review of Law and Economics, Elsevier, vol. 38(C), pages 48-57.
    • Handle: RePEc:eee:irlaec:v:38:y:2014:i:c:p:48-57
    DOI: 10.1016/j.irle.2014.03.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0144818814000131
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irle.2014.03.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
    2. repec:hal:spmain:info:hdl:2441/2k2jnd64aa9g19nja481vjohq3 is not listed on IDEAS
    3. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
    4. Armin Falk & Ernst Fehr & Urs Fischbacher, 2005. "Driving Forces Behind Informal Sanctions," Econometrica, Econometric Society, vol. 73(6), pages 2017-2030, November.
    5. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough or Don't Pay at All," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 791-810.
    6. Armin Falk & Ernst Fehr & Urs Fischbacher, "undated". "Driving Forces of Informal Sanctions," IEW - Working Papers 059, Institute for Empirical Research in Economics - University of Zurich.
    7. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    8. Ernst Fehr & Klaus M. Schmidt, "undated". "Theories of Fairness and Reciprocity - Evidence and Economic Applications," IEW - Working Papers 075, Institute for Empirical Research in Economics - University of Zurich.
    9. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
    10. Jean‐Robert Tyran & Lars P. Feld, 2006. "Achieving Compliance when Legal Sanctions are Non‐deterrent," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 135-156, March.
    11. Galbiati, Roberto & Schlag, Karl H. & van der Weele, Joël J., 2013. "Sanctions that signal: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 34-51.
    12. Colin F. Camerer & Ernst Fehr, "undated". "Measuring Social Norms and Preferences using Experimental Games: A Guide for Social Scientists," IEW - Working Papers 097, Institute for Empirical Research in Economics - University of Zurich.
    13. Sebastian Kube & Christian Traxler, 2011. "The Interaction of Legal and Social Norm Enforcement," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(5), pages 639-660, October.
    14. Andreoni, James, 1993. "An Experimental Test of the Public-Goods Crowding-Out Hypothesis," American Economic Review, American Economic Association, vol. 83(5), pages 1317-1327, December.
    15. Urs Fischbacher & Simon Gachter, 2010. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Goods Experiments," American Economic Review, American Economic Association, vol. 100(1), pages 541-556, March.
    16. Ernst Fehr & John A. List, 2004. "The Hidden Costs and Returns of Incentives-Trust and Trustworthiness Among CEOs," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 743-771, September.
    17. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    18. Joel van der Weele, 2012. "The Signaling Power of Sanctions in Social Dilemmas," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 28(1), pages 103-126.
    19. Josef Falkinger, 2000. "A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence," American Economic Review, American Economic Association, vol. 90(1), pages 247-264, March.
    20. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    21. Oren Bar-Gill, 2004. "Law and Preferences," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(2), pages 331-352, October.
    22. Galbiati, Roberto & Vertova, Pietro, 2008. "Obligations and cooperative behaviour in public good games," Games and Economic Behavior, Elsevier, vol. 64(1), pages 146-170, September.
    23. Armin Falk & Michael Kosfeld, "undated". "Distrust - The Hidden Cost of Control," IEW - Working Papers 193, Institute for Empirical Research in Economics - University of Zurich.
    24. López-Pérez, Raúl, 2008. "Aversion to norm-breaking: A model," Games and Economic Behavior, Elsevier, vol. 64(1), pages 237-267, September.
    25. repec:hal:spmain:info:hdl:2441/7o52iohb7k6srk09o0ks2e12i is not listed on IDEAS
    26. Cooter, Robert, 2000. "Do Good Laws Make Good Citizens? An Economic Analysis of Internalizing Legal Values," Berkeley Olin Program in Law & Economics, Working Paper Series qt3xr1v1x2, Berkeley Olin Program in Law & Economics.
    27. Bohnet, Iris & Frey, Bruno S. & Huck, Steffen, 2001. "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," American Political Science Review, Cambridge University Press, vol. 95(1), pages 131-144, March.
    28. Bruno S. Frey & Reto Jegen, 2001. "Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    29. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 489-520.
    30. Patricia Funk, 2007. "Is There An Expressive Function of Law? An Empirical Analysis of Voting Laws with Symbolic Fines," American Law and Economics Review, American Law and Economics Association, vol. 9(1), pages 135-159.
    31. Samuel Bowles & Sandra Polania-Reyes, 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 368-425, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Riedel, Nadine & Schildberg-Hörisch, Hannah, 2013. "Asymmetric obligations," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 67-80.
    2. Samuel Bowles & Sandra Polania-Reyes, 2011. "Economic incentives and social preferences: substitutes or complements?," Department of Economics University of Siena 617, Department of Economics, University of Siena.
    3. Fluet, Claude & Galbiati, Rpbertp, 2016. "Lois et normes : les enseignements de l'économie comportementale," L'Actualité Economique, Société Canadienne de Science Economique, vol. 92(1-2), pages 191-215, Mars-Juin.
    4. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series 2734, CESifo.
    5. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A preference-Based Lucas Critique of Public Policy," UMASS Amherst Economics Working Papers 2009-11, University of Massachusetts Amherst, Department of Economics.
    6. Roberto Galbiati & Pietro Vertova, 2006. "The Hidden Effect of Rules: Behavioural consequences of Obligations," Discussion Papers 18_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    7. Deffains, Bruno & Espinosa, Romain & Fluet, Claude, 2019. "Laws and norms: Experimental evidence with liability rules," International Review of Law and Economics, Elsevier, vol. 60(C).
    8. Andrei Bremzen & Elena Khokhlova & Anton Suvorov & Jeroen van de Ven, 2015. "Bad News: An Experimental Study on the Informational Effects Of Rewards," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 55-70, March.
    9. Bowles, Samuel & Hwang, Sung-Ha, 2008. "Social preferences and public economics: Mechanism design when social preferences depend on incentives," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1811-1820, August.
    10. Kirchkamp, Oliver & Mill, Wladislaw, 2020. "Conditional cooperation and the effect of punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 150-172.
    11. Xiao, Erte, 2013. "Profit-seeking punishment corrupts norm obedience," Games and Economic Behavior, Elsevier, vol. 77(1), pages 321-344.
    12. Kajackaite, Agne & Werner, Peter, 2015. "The incentive effects of performance requirements – A real effort experiment," Journal of Economic Psychology, Elsevier, vol. 49(C), pages 84-94.
    13. Elena Cettolin & Arno Riedl, 2011. "Partial Coercion, Conditional Cooperation, and Self-Commitment in Voluntary Contributions to Public Goods," CESifo Working Paper Series 3556, CESifo.
    14. Silverman, Dan & Slemrod, Joel & Uler, Neslihan, 2014. "Distinguishing the role of authority “in” and authority “to”," Journal of Public Economics, Elsevier, vol. 113(C), pages 32-42.
    15. Sebastian Kube & Christian Traxler, 2011. "The Interaction of Legal and Social Norm Enforcement," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(5), pages 639-660, October.
    16. Andreas Fuster & Stephan Meier, 2010. "Another Hidden Cost of Incentives: The Detrimental Effect on Norm Enforcement," Management Science, INFORMS, vol. 56(1), pages 57-70, January.
    17. Roland Benabou & Jean Tirole, 2011. "Laws and Norms," NBER Working Papers 17579, National Bureau of Economic Research, Inc.
    18. Irlenbusch, Bernd & Sliwka, Dirk, 2005. "Incentives, Decision Frames, and Motivation Crowding Out – An Experimental Investigation," IZA Discussion Papers 1758, Institute of Labor Economics (IZA).
    19. Luigino Bruni & Vittorio Pelligra & Tommaso Reggiani & Matteo Rizzolli, 2020. "The Pied Piper: Prizes, Incentives, and Motivation Crowding-in," Journal of Business Ethics, Springer, vol. 166(3), pages 643-658, October.
    20. Kenju Kamei & Louis Putterman & Jean-Robert Tyran, 2011. "State or Nature? Formal vs. Informal Sanctioning in the Voluntary Provision of Public Goods," Working Papers 2011-3, Brown University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:38:y:2014:i:c:p:48-57. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/irle .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.