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Social Norms and Economic Incentives in Firms

Author

Listed:
  • Huck, Steffen

    () (University College London)

  • Kübler, Dorothea

    () (WZB - Social Science Research Center Berlin)

  • Weibull, Jörgen W.

    () (Stockholm School of Economics)

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 different 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 incentive scheme. We also show how social norms can induce multiplicity of equilibria and how steeper economic incentives can reduce effort.

Suggested Citation

  • Huck, Steffen & Kübler, Dorothea & Weibull, Jörgen W., 2010. "Social Norms and Economic Incentives in Firms," IZA Discussion Papers 5264, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5264
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    References listed on IDEAS

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    Keywords

    incentives; social norms; contracts;

    JEL classification:

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

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