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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.

Suggested Citation

  • Huck, Steffen, 1998. "Trust, Treason, and Trials: An Example of How the Evolution of Preferences Can Be Driven by Legal Institutions," Journal of Law, Economics, and Organization, Oxford University Press, vol. 14(1), pages 44-60, April.
  • Handle: RePEc:oup:jleorg:v:14:y:1998:i:1:p:44-60
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    Cited by:

    1. Riedel, Nadine & Schildberg-Hörisch, Hannah, 2013. "Asymmetric obligations," Journal of Economic Psychology, Elsevier, vol. 35(C), pages 67-80.
    2. 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.
    3. Adriani, Fabrizio & Sonderegger, Silvia, 2015. "Trust, trustworthiness and the consensus effect: An evolutionary approach," European Economic Review, Elsevier, vol. 77(C), pages 102-116.
    4. Jean-Robert Tyran & Lars P. Feld, 2006. "Achieving Compliance when Legal Sanctions are Non-deterrent," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 135-156, March.
    5. 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.
    6. Kubler, Dorothea, 2001. "On the Regulation of Social Norms," Journal of Law, Economics, and Organization, Oxford University Press, vol. 17(2), pages 449-476, October.
    7. Poulsen, A., 2001. "Reciprocity, Materialism and Welfare: An Evolutionary Model," Papers 01-3, Aarhus School of Business - Department of Economics.
    8. 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.
    9. 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.
    10. van der Weele Joël, 2012. "Beyond the State of Nature: Introducing Social Interactions in the Economic Model of Crime," Review of Law & Economics, De Gruyter, vol. 8(2), pages 401-432, October.
    11. Harvey James, 2002. "On the Reliability of Trusting," Microeconomics 0202002, University Library of Munich, Germany.
    12. 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. 0(Number 2), pages 1-20.
    13. 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).
    14. Harvey James, 2002. "The Trust Paradox: A Survey of Economic Inquiries Into the Nature of Trust and Trustworthiness," Microeconomics 0202001, University Library of Munich, Germany.
    15. Crettez, Bertrand & Deffains, Bruno & Musy, Olivier, 2014. "Legal convergence and endogenous preferences," International Review of Law and Economics, Elsevier, vol. 39(C), pages 20-27.

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