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How laws affect behavior: Obligations, incentives and cooperative behavior

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  • 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
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