Can Contracts Signal Social Norms? Experimental Evidence

44 Pages Posted: 13 Jul 2013

See all articles by Anasatsia Danilov

Anasatsia Danilov

University of Cologne

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management; IZA Institute of Labor Economics

Abstract

We investigate whether incentive schemes signal social norms and thus affect behavior beyond their direct economic consequences. A principal-agent experiment is studied in which prior to contract choice principals are informed about past actions of other agents and thus have more information about "norms of behavior". Compared to a setting with uninformed principals agents exert nearly 50% higher efforts under a fixed wage contract when an informed principal had chosen this contract. Apparently the informed principal's choice signals a norm not to exploit the trust which leads to more trustworthy behavior. This mechanism's robustness is explored in further experiments.

Keywords: social norms, contracts, incentives, signaling, experiments

JEL Classification: D03, C91, D86

Suggested Citation

Danilov, Anastasia and Sliwka, Dirk, Can Contracts Signal Social Norms? Experimental Evidence. IZA Discussion Paper No. 7477. Available at SSRN: https://ssrn.com/abstract=2293294

Anastasia Danilov (Contact Author)

University of Cologne ( email )

Dirk Sliwka

University of Cologne - Department of Business Administration and Human Resource Management ( email )

Koln, 50923
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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