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Can Contracts Signal Social Norms? Experimental Evidence

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  • Danilov, Anastasia

    (University of Cologne)

  • Sliwka, Dirk

    (University of Cologne)

Abstract

We investigate whether incentive schemes signal social norms and thus affect behavior beyond their direct economic consequences. A principal-agent experiment is studied in which prior to contract choice principals are informed about past actions of other agents and thus have more information about "norms of behavior". Compared to a setting with uninformed principals agents exert nearly 50% higher efforts under a fixed wage contract when an informed principal had chosen this contract. Apparently the informed principal's choice signals a norm not to exploit the trust which leads to more trustworthy behavior. This mechanism's robustness is explored in further experiments.

Suggested Citation

  • Danilov, Anastasia & Sliwka, Dirk, 2013. "Can Contracts Signal Social Norms? Experimental Evidence," IZA Discussion Papers 7477, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7477
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    Cited by:

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    5. Hernán Bejarano & Brice Corgnet & Joaquín Gómez-Miñambres, 2019. "Labor Contracts, Gift-Exchange and Reference Wages: Your Gift Need Not Be Mine!," Working Papers 19-26, Chapman University, Economic Science Institute.
    6. Matthias Fahn, 2019. "Reciprocity in dynamic employment relationships," CESifo Working Paper Series 7634, CESifo.
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    8. Cromwell, Erich & Goerg, Sebastian J. & Leszczynska, Monika, 2018. "More than the Money: Payoff-Irrelevant Terms in Relational Contracts," IZA Discussion Papers 11712, Institute of Labor Economics (IZA).
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    10. Riehm, Tobias & Fugger, Nicolas & Gillen, Philippe & Gretschko, Vitali & Werner, Peter, 2021. "Social norms and market behavior: Evidence from a large population sample," ZEW Discussion Papers 21-017, ZEW - Leibniz Centre for European Economic Research.
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    More about this item

    Keywords

    social norms; contracts; incentives; signaling; experiments;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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