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Trust, Treason, and Trials: An Example of How the Evolution of Preferences Can Be Driven by Legal Institutions

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  • Huck, Steffen

Abstract

This study tries to enlarge the scope of law and economics by providing an example that legal institutions do not only have short-run effects on present behavior by changing the cost-benefit relation of different actions but can also drive the evolution of preferences. Therefore legal design has long-run effects on behavior which should not by neglected by legislators. The study presents a simple model of cooperation where only one party has the option to observe the outcome of joint efforts. While this party can pretend a failure of cooperation, the other party has the option to monitor its partner. The model considers resource variables and a psychological variable reflecting remorse in case of betrayal. Players are assumed to behave rationally according to given preferences, but preferences may change in the course of evolution. The results show that a "good" design of legal institutions can crowd out "bad" preferences. Copyright 1998 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Journal of Law, Economics and Organization.

Volume (Year): 14 (1998)
Issue (Month): 1 (April)
Pages: 44-60

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Handle: RePEc:oup:jleorg:v:14:y:1998:i:1:p:44-60

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Cited by:
  1. Harvey James, 2002. "On the Reliability of Trusting," Microeconomics 0202002, EconWPA.
  2. Riedel, Nadine & Schildberg-Hörisch, Hannah, 2013. "Asymmetric obligations," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 67-80.
  3. Lusk, Jayson L. & Rozan, Anne, 2008. "Public Policy and Endogenous Beliefs: The Case of Genetically Modified Food," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 33(2), August.
  4. Kübler, Dorothea, 2000. "On the regulation of social norms," SFB 373 Discussion Papers 2000,38, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  5. Poulsen, Anders, 2001. "Reciprocity, Materialism and Welfare: An Evolutionary Model," Working Papers 01-3, University of Aarhus, Aarhus School of Business, Department of Economics.
  6. James Jr., Harvey S., 2002. "The trust paradox: a survey of economic inquiries into the nature of trust and trustworthiness," Journal of Economic Behavior & Organization, Elsevier, vol. 47(3), pages 291-307, March.
  7. Bonatti, Luigi, 2008. "Cultural relativism and ideological policy makers in a general equilibrium model with for-profit and non-profit enterprises," Research in Economics, Elsevier, vol. 62(1), pages 1-15, March.
  8. Friederike Mengel, 2006. "A Model Of Immigration, Integration And Cultural Transmission Of Social Norms," Working Papers. Serie AD 2006-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Fabrizio Adriani & Silvia Sonderegger, 2013. "Trust, Trustworthiness and the Consensus Effect: An Evolutionary Approach," Discussion Papers 2013-09, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  10. O'Hara, Sabine U. & Stagl, Sigrid, 2002. "Endogenous preferences and sustainable development," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 31(5), pages 511-527.
  11. Mengel, Friederike, 2008. "Matching structure and the cultural transmission of social norms," Journal of Economic Behavior & Organization, Elsevier, vol. 67(3-4), pages 608-623, September.

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