Social norms and economic incentives in firms

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 three 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 contract. Multiplicity of equilibria and crowding out effects of steeper incentives can arise.

JEL codes

Reference

Dorothea Kubler, Jörgen W. Weibull, and Steffen Huck, “Social norms and economic incentives in firms”, Journal of Economic Behavior and Organization, vol. 83, 2012, pp. 173–185.