Coordinating in the Shadow of the Law: Two Contextualized Tests of the Focal Point Theory of Legal Compliance

Abstract:     
In situations where people have an incentive to coordinate their behavior, law can provide a framework for understanding and predicting what others are likely to do. According to the focal point theory of expressive law, the law`s articulation of a behavior can sometimes create self-fulfilling expectations that it will occur. Existing theories of legal compliance emphasize the effect of sanctions or legitimacy; we argue that, in addition to sanctions and legitimacy, law can also influence compliance simply by making one outcome salient. We tested this claim in two experiments where sanctions and legitimacy were held constant. Experiment 1 demonstrated that a mandatory legal rule operating in a property dispute influenced compliance only when there is an element of coordination. Experiment 2 demonstrated that a default rule in a contract negotiation acted as a focal point for coordinating negotiation decisions. Both experiments confirm that legal rules can create a focal point around which people tend to coordinate in a mixed motive coordination game.

Keywords: expressive law, legitimacy, compliance, coordination, negotiation, mixed motive games, hawk-dove game, chicken game, battle of the sexes game, default rules

JEL Classifications: C78, K00, K19

Accepted Paper Series