IDEAS home Printed from https://ideas.repec.org/p/tiu/tiutil/5925920e-05c6-4ae0-8e76-d7dc5cc314a6.html
   My bibliography  Save this paper

The Sorry Clause (Revision of TILEC DP 2016-004)

Author

Listed:
  • Srivastava, Vatsalya

    (Tilburg University, TILEC)

Abstract

This paper shows the existence of a sorry equilibrium in a game of imperfect public monitoring. In equilibrium, a self-imposed costly apology tendered after an accidental defection, makes private information public, allowing for continued cooperation. This cost cannot be too high or too low. Efficiency of the sorry equilibrium is evaluated and its welfare outcomes compared to other informal governance mechanisms and the formal legal system. With the possibility of accidental defections, it is shown that informal mechanisms have limitations, while formal legal systems can generate perverse incentives. The analysis demonstrates that apologies serve as a useful economic governance institution.

Suggested Citation

  • Srivastava, Vatsalya, 2017. "The Sorry Clause (Revision of TILEC DP 2016-004)," Discussion Paper 2017-002, Tilburg University, Tilburg Law and Economic Center.
  • Handle: RePEc:tiu:tiutil:5925920e-05c6-4ae0-8e76-d7dc5cc314a6
    as

    Download full text from publisher

    File URL: https://pure.uvt.nl/portal/files/14907086/2017_002.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Posner, Richard A, 1997. "Social Norms and the Law: An Economic Approach," American Economic Review, American Economic Association, vol. 87(2), pages 365-369, May.
    2. Abeler, Johannes & Calaki, Juljana & Andree, Kai & Basek, Christoph, 2010. "The power of apology," Economics Letters, Elsevier, vol. 107(2), pages 233-235, May.
      • Johannes Abeler & Juljana Calaki & Kai Andree & Christoph Basek, 2009. "The Power of Apology," Discussion Papers 2009-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
      • Johannes Abeler & Juljana Calaki & Kai Andree & Christoph Basek, 2009. "The Power of Apology," Discussion Papers 2009-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    3. Folkes, Valerie S, 1984. " Consumer Reactions to Product Failure: An Attributional Approach," Journal of Consumer Research, Oxford University Press, vol. 10(4), pages 398-409, March.
    4. Drew Fudenberg & David Levine & Eric Maskin, 2008. "The Folk Theorem With Imperfect Public Information," World Scientific Book Chapters,in: A Long-Run Collaboration On Long-Run Games, chapter 12, pages 231-273 World Scientific Publishing Co. Pte. Ltd..
    5. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-554, May.
    6. repec:cup:apsrev:v:86:y:1992:i:02:p:404-417_08 is not listed on IDEAS
    7. Rasmusen, Eric, 1996. "Stigma and Self-Fulfilling Expectations of Criminality," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 519-543, October.
    8. Joel Sobel, 2006. "For Better or Forever: Formal versus Informal Enforcement," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 271-298, April.
    9. Maja Micevska & Arnab K Hazra, 2004. "The Problem Of Court Congestion: Evidence From The Indian Lower Courts," Royal Economic Society Annual Conference 2004 2, Royal Economic Society.
    10. Micevska, Maja B. & Hazra, Arnab K., 2004. "The Problem Of Court Congestion: Evidence From Indian Lower Courts," Discussion Papers 18750, University of Bonn, Center for Development Research (ZEF).
    11. Avinash Dixit, 2009. "Governance Institutions and Economic Activity," American Economic Review, American Economic Association, vol. 99(1), pages 5-24, March.
    12. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
    13. Douglas W. Allen & Clyde G. Reed, 2006. "The Duel of Honor: Screening For Unobservable Social Capital," American Law and Economics Review, Oxford University Press, vol. 8(1), pages 81-115.
    14. Jianzhong Wu & Robert Axelrod, 1995. "How to Cope with Noise in the Iterated Prisoner's Dilemma," Journal of Conflict Resolution, Peace Science Society (International), vol. 39(1), pages 183-189, March.
    15. Scott E. Masten & Jens Prüfer, 2014. "On the Evolution of Collective Enforcement Institutions: Communities and Courts," The Journal of Legal Studies, University of Chicago Press, vol. 43(2), pages 359-400.
    16. Fischbacher, Urs & Utikal, Verena, 2013. "On the acceptance of apologies," Games and Economic Behavior, Elsevier, vol. 82(C), pages 592-608.
    17. Clive Bull, 1987. "The Existence of Self-Enforcing Implicit Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 102(1), pages 147-159.
    18. Benjamin Ho, 2012. "Apologies as Signals: With Evidence from a Trust Game," Management Science, INFORMS, vol. 58(1), pages 141-158, January.
    19. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    apology; sorry; imperfect public monitoring; uncertainty; social norms; economics governance; Legal institutions; incentives; courts;

    JEL classification:

    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tiu:tiutil:5925920e-05c6-4ae0-8e76-d7dc5cc314a6. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Broekman). General contact details of provider: https://www.tilburguniversity.edu/research/institutes-and-research-groups/center-ar/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.