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Social norms and economic incentives in firms

  • Huck, Steffen
  • Kübler, Dorothea
  • Weibull, Jörgen

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 three 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 contract. Multiplicity of equilibria and crowding out effects of steeper incentives can arise.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 83 (2012)
Issue (Month): 2 ()
Pages: 173-185

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Handle: RePEc:eee:jeborg:v:83:y:2012:i:2:p:173-185
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