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Image versus Information: Changing Societal Norms and Optimal Privacy

Author

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  • S. Nageeb Ali
  • Roland Bénabou

Abstract

We analyze the costs and benefits of using social image to foster desirable behaviors. Each agent acts based on his intrinsic motivation, private assessment of the public good, and reputational concern for appearing prosocial. A Principal sets the general degree of privacy, observes the social outcome, and implements a policy: investment, subsidy, law, etc. Individual visibility reduces free riding but makes aggregate behavior ("descriptive norm") less informative about societal preferences ("prescriptive norm"). We derive the level of privacy (and material incentives) that optimally trades off social enforcement and learning, and we characterize its variations with the economy's stochastic and informational structure.

Suggested Citation

  • S. Nageeb Ali & Roland Bénabou, 2020. "Image versus Information: Changing Societal Norms and Optimal Privacy," American Economic Journal: Microeconomics, American Economic Association, vol. 12(3), pages 116-164, August.
    • Handle: RePEc:aea:aejmic:v:12:y:2020:i:3:p:116-64
    DOI: 10.1257/mic.20180052
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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