Is a Fine Still a Price? Replication as Robustness in Empirical Legal Studies

Abstract

Can fines lead to more of an undesirable behavior, rather than deterring it? This was the surprising finding in Uri Gneezy and Aldo Rustichini, “A Fine is a Price” published in the Journal of Legal Studies in 2000. In this field experiment at Israeli daycares, the introduction of fines caused an increase in late pick-ups by parents. The study has been frequently cited, especially for its suggestion that a fine can act as a price for non-compliance that “crowds-out” social norms and motivations for individuals.

In this article, we conduct two related studies to explore the robustness of Gneezy & Rustichini’s findings and the relevance of their suggested explanations. We seek to replicate their results using experimental surveys administered on MTurk, an increasingly common methodology in empirical legal studies, psychology and economics. While not an exact replication, it allows us to control aspects of the experimental design that are difficult to replicate in the field. We are also able to directly investigate whether fines persistently change the way respondents perceive the consequences (signaling, completing the contract) or relevant social motivations (crowding-out), as suggested by Gneezy & Rustichini. In the first study we translate the original daycare field setting into a vignette-based experimental survey. Our second study similarly investigates the effect of introducing a fine on income tax reporting compliance – an example suggested in the original study. In both studies, respondents are randomized into experimental conditions exposing them to one of two alternate fines or a social norm-based measure. We solicit multiple compliance measures for respondents along with measures of the importance of the alternate explanations to their decisions.

Our survey results do not replicate the original findings. In both our daycare and tax studies, the introduction of fines causes respondents to reduce non-compliant behaviour. Respondents expect others to behave similarly. Fines do not cause respondents to adjust their concerns about an incomplete contract consistently with Gneezy & Rustichini’s theory. They also show very little evidence of fines crowding out social motivations, despite being responsive to our social treatments. The effects of fines on outcome behaviours and respondents’ reasons are transitory. Once the fines are removed, our respondents return to their baseline behaviours. The survey results are consistent with intuitive judgments (and standard rational-choice theory) that fines deter. A survey is not a field experiment; however, our results suggest that more research is required to understand when and how any “fine is a price” effect may arise.

Keywords: fines, deterrence, tax compliance, social norms, motivational-crowding, crowding-out, experimental analysis, replication, contract, incomplete contracts, empirical analysis, law & economics