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On esteem-based incentives

Author

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  • Mazyaki, Ali
  • van der Weele, Joël

Abstract

The rise of the internet, increased connectivity and higher availability of personal data increases the relevance of incentives based on reputation and the allocation of esteem. However, their use is controversial: critics argue that shaming can lead to a loss of control over the size of the sanction and to mob justice. We use the signaling model of social behavior by Bénabou and Tirole (2011) to explore the effect of esteem-based incentives and their interaction with traditional fines. We show that the use of esteem and stigma can indeed lead to a loss of control by generating multiple equilibria, some of which feature high levels of compliance and high levels of stigma. Moreover, the deterrent effect of monetary and esteem incentives is interdependent. If both types of incentives are costly to implement, esteem incentives should optimally be used relatively more for rare behaviors and in societies that have more heterogeneous values.

Suggested Citation

  • Mazyaki, Ali & van der Weele, Joël, 2019. "On esteem-based incentives," International Review of Law and Economics, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:irlaec:v:60:y:2019:i:c:s0144818818302345
    DOI: 10.1016/j.irle.2019.06.001
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    More about this item

    Keywords

    Legal sanctions; Signaling; Incentives; Reputation;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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