More Order Without More Law: A Theory of Social Norms and Organizational Cultures

Abstract

This article applies psychological game theory to study ther maintenance of social order. It models the control of corruption in principal-supervisor-agent relationships. The models possess multiple equilibria, which correspond to certain social norms and organizational cultures or their absence. The models demonstrate how expectations concerning the likeklihood of corrupt behavior can influence decisions to engage in such behavior via the magnitude of endogenous remorse on the part of the actor.

JEL Classification: M14