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The Hidden Effect of Rules: Behavioural consequences of Obligations

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  • Roberto Galbiati
  • Pietro Vertova

Abstract

How formal institutions (e.g. laws and public policies) affect human behaviour represents a crucial issue in economic analysis. Formal rules are defined as obligations backed by incentives. The economic literature has largely studied the role of material incentives in shaping individual behaviour. Yet, the role of obligations, i.e. what formal rules ask people to do or not to do, remains a black box. In this paper we run a public good game to analyze the behavioural effects of obligations. We find experimental evidence that obligations can affect cooperative behaviour both by coordinating conditional co-operators’ beliefs on others’ behaviour and by directly affecting social preferences. Our results shed a new light on the behavioural channels through which formal rules can affect individual behaviour and suggest the opportunity to broaden the scope of analysis in order to better understand the effects of institutions on economic outcomes.

Suggested Citation

  • 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.
    • Handle: RePEc:prt:dpaper:18_2006
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    References listed on IDEAS

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    More about this item

    Keywords

    Beliefs; Human Behaviour; Incentives; Obligations; Preferences; Public Good Game.;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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