Shaming as an incentive mechanism against stealing: Behavioral and physiological evidence

We study experimentally the decision of an individual to steal or pay for an object that is produced at a cost by another individual. We consider two conditions. In the first condition, subjects caught stealing are sanctioned with a nominal fee. In the second condition, the sanction is increased by making the identity of the individual public (shaming). We also collect skin conductance responses to better understand the emotional arousal conducive to choices. Behaviorally, we show that stealing decreases significantly when shaming is introduced. More importantly, the emotional response at the time of decision strongly correlates with behavior. In particular, subjects who are more aroused are more likely to steal in the first condition, and also more likely to stop stealing in the second condition. Based on this physiological evidence, we develop a theoretical model where current decisions contribute to a “moral stock”, which in turns affects the future cost of stealing and therefore the future decisions. The structural estimation of this model provides a good fit while capturing the heterogeneity across individuals.