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

Author

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  • Leonardo Becchetti
  • Vittorio Pelligra
  • Fiammetta Rossetti

Abstract

A company that pursues illicit practices may crowd out competitors that behave legally eroding the public good of legality and integrity. Recently born institutional legality ratings tackle this problem. 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. Our findings document that redistribution mechanisms, 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

  • Leonardo Becchetti & Vittorio Pelligra & Fiammetta Rossetti, 2023. "The Corporate Legality Game A Lab Experiment on the Impact of Policies, Frames and Information," Working Papers of Department of Management, Strategy and Innovation, Leuven 722267, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.
    • Handle: RePEc:ete:msiper:722267
    Note: paper number MSI_2305
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    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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