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Social Norms and Economic Incentives in Firms

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  • Huck, Steffen

    ()
    (University College London)

  • Kübler, Dorothea

    ()
    (WZB - Social Science Research Center Berlin)

  • Weibull, Jörgen W.

    ()
    (Stockholm School of Economics)

Abstract

This paper studies the interplay between economic incentives and social norms in firms. We introduce a general framework to model social norms arguing that norms stem from agents’ desire for, or peer pressure towards, social efficiency. In a simple model of team production we examine the interplay of different types of contracts with social norms. We show that one and the same norm can be output-increasing, neutral, or output-decreasing depending on the incentive scheme. We also show how social norms can induce multiplicity of equilibria and how steeper economic incentives can reduce effort.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5264.

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Length: 28 pages
Date of creation: Oct 2010
Date of revision:
Publication status: published in: Journal of Economic Behavior & Organization, 2012, 83 (2), 173-185
Handle: RePEc:iza:izadps:dp5264

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Keywords: incentives; social norms; contracts;

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References

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  1. Oliver Hart, 2001. "Norms and the Theory of the Firm," NBER Working Papers 8286, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Danilov, Anastasia & Sliwka, Dirk, 2013. "Can Contracts Signal Social Norms? Experimental Evidence," IZA Discussion Papers 7477, Institute for the Study of Labor (IZA).
  2. Weibull, Jörgen & Villa, Edgar, 2005. "Crime, punishment and social norms," Working Paper Series in Economics and Finance 610, Stockholm School of Economics.
  3. Ivanova-Stenzel, Radosveta & Kübler, Dorothea, 2005. "Courtesy and Idleness: Gender Differences in Team Work and Team Competition," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 91, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  4. Aakvik, Arild & Hansen, Frank & Torsvik, Gaute, 2013. "Dynamic Peer Effects in Sales Teams," Working Papers in Economics, University of Bergen, Department of Economics 10/13, University of Bergen, Department of Economics.
  5. Patricia CRIFO & Marc-Arthur DIAYE, 2011. "The Composition of Compensation Policy : from Cash to Fringe Benefits," Annales d'Economie et de Statistique, ENSAE, issue 101-102, pages 307-326.
  6. Kuran,T. & Sandholm,W.H., 2002. "Cultural integration and its discontents," Working papers, Wisconsin Madison - Social Systems 20, Wisconsin Madison - Social Systems.
  7. Jocelyn Donze & Trude Gunnes, 2013. "Becoming “We” instead of “I”. Identity management and incentives in the workplace," Discussion Papers, Research Department of Statistics Norway 760, Research Department of Statistics Norway.
  8. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 19(1), pages 9-32, Winter.
  9. David, Gill & Rebecca, Stone, 2012. "Desert and inequity aversion in teams," MPRA Paper 36864, University Library of Munich, Germany.
  10. Dirk Sliwka, 2007. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," American Economic Review, American Economic Association, American Economic Association, vol. 97(3), pages 999-1012, June.
  11. Jan Tichem, 2013. "Endogenous Effort Norms in Hierarchical Firms," Tinbergen Institute Discussion Papers 13-198/VII, Tinbergen Institute.
  12. Stephan Müller & Georg von Wangenheim, 2014. "The impact of market innovations on the evolution of norms: the sustainability case," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201432, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  13. Blaufus, Kay & Bob, Jonathan & Otto, Philipp E., 2014. "The effect of tax privacy on tax compliance: An experimental investigation," arqus Discussion Papers in Quantitative Tax Research 164, arqus - Arbeitskreis Quantitative Steuerlehre.

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