Institutions, Opportunism and Prosocial Behavior: Some Experimental Evidence

34 Pages Posted: 23 May 2020

See all articles by Antonio Cabrales

Antonio Cabrales

University College London - Department of Economics

Irma Clots-Figueras

University of Kent

Roberto Hernán-González

Burgundy School of Business

Praveen Kujal

Middlesex University

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Abstract

Formal or informal institutions have long been adopted by societies to protect against opportunistic behavior. However, we know very little about how these institutions are chosen and their impact on behavior. We experimentally investigate the demand for different levels of institutions that provide low to high levels of insurance and its subsequent impact on prosocial behavior. We conduct a large-scale online experiment where we add the possibility of purchasing insurance to safeguard against low reciprocity to the standard trust game. We compare two different mechanisms, the private (purchase) and the social (voting) choice of institutions.Whether voted or purchased, we find that there is demand for institutions in low trustworthiness groups, while high trustworthiness groups always demand lower levels of institutions. Lower levels of institutions are demanded when those who can benefit from opportunistic behavior, i.e. low trustworthiness individuals, can also vote for them. Importantly, the presence of insurance crowds out civic spirit even when subjects can choose the no insurance option: trustworthiness when formal institutions are available is lower than in their absence.

Keywords: institutions, trust, trustworthiness, voting, insurance

JEL Classification: C92, D02, D64

Suggested Citation

Cabrales, Antonio and Clots-Figueras, Irma and Hernán-González, Roberto and Kujal, Praveen, Institutions, Opportunism and Prosocial Behavior: Some Experimental Evidence. IZA Discussion Paper No. 13270, Available at SSRN: https://ssrn.com/abstract=3608519

Antonio Cabrales (Contact Author)

University College London - Department of Economics ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

Irma Clots-Figueras

University of Kent ( email )

Keynes College
Canterbury, Kent CT2 7NP
United Kingdom

Roberto Hernán-González

Burgundy School of Business ( email )

29 Rue Sambin
Dijon, 21000
France

Praveen Kujal

Middlesex University ( email )

The Burroughs
London, NW4 4BT
United Kingdom

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