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The Corporate Legality Game A Lab Experiment on The Impact of Policies, Frames and Information

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  • L. Becchetti
  • V. Pelligra
  • F. Rossetti

Abstract

A company that pursues illicit practices (e.g., money laundering, tax dodging, corruption of public officials in procurement races, etc.) may underprice and crowd out competitors that behave legally, thereby eroding the public good of legality and integrity. Recently born institutional legality ratings tackle this problem by signaling companies with excellent legality record to consumers. Redistributive policy actions aimed to tax "defectors" (i.e. buyers of unrated products) in favor of "co-operators" (i.e. buyers of "legality-rated" products) may further enforce legality, and fight corruption. We analyze the impact of the legality-rating frame by means of a randomized experiment. The experiment accounts for the effects of fiscal policies that redistribute income from defectors to co-operators either in presence or in absence of the legality frame. Our findings document that the redistribution mechanism, the legality frame and the conformity information design contribute to alleviate the prisoner's dilemma and generate significant deviations from the Nash Equilibrium.

Suggested Citation

  • L. Becchetti & V. Pelligra & F. Rossetti, 2016. "The Corporate Legality Game A Lab Experiment on The Impact of Policies, Frames and Information," Working Paper CRENoS 201601, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:201601
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    Cited by:

    1. Becchetti, Leonardo & Corrado, Germana & Pelligra, Vittorio & Rossetti, Fiammetta, 2016. "Happiness and Preferences in a Legality Social Dilemma," AICCON Working Papers 145-2016, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    2. Leonardo Becchetti & Germana Corrado & Vittorio Pelligra & Fiammetta Rossetti, 2016. "Happiness and Preferences in a Legality Social Dilemma: Comparing the Direct and Indirect Approach," CEIS Research Paper 372, Tor Vergata University, CEIS, revised 25 Mar 2016.
    3. Becchetti, Leonardo & Corrado, Germana & Pelligra, Vittorio & Rossetti, Fiammetta, 2020. "Satisfaction and preferences in a legality social dilemma: Does corporate social responsibility impact consumers’ behaviour?," Journal of Policy Modeling, Elsevier, vol. 42(2), pages 483-502.
    4. Vittorio Pelligra & Alejandra Vásquez, 2020. "Empathy and socially responsible consumption: an experiment with the vote-with-the-wallet game," Theory and Decision, Springer, vol. 89(4), pages 383-422, November.

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    More about this item

    Keywords

    Analysis of Collective Decision-Making; Corruption; Laboratory Experiment; Redistribution; conformity;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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