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Social norms and economic incentives in firms

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

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 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.

Suggested Citation

  • Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen, 2012. "Social norms and economic incentives in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 83(2), pages 173-185.
  • Handle: RePEc:eee:jeborg:v:83:y:2012:i:2:p:173-185
    DOI: 10.1016/j.jebo.2012.05.005
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    More about this item

    Keywords

    Social norms; Crowding out; Contracts;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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