Social Norms and Moral Hazard

Martin Dufwenberg and Michael Lundholm ()

No 1997:28, Working Paper Series from Uppsala University, Department of Economics

Abstract: The probability of income loss depends on talent and effort. Effort has positive externalities and therefore individuals are proportion to their perceived diligence. The social norm requires more effort from individuals perceived as more talented, but talent is private information and individuals cunningly choose effort so as to manipulate the public perception of their talent. We analyze the workings of a social insurance system in this setting. It turns out that social norms may mitigate moral hazard. However, the distribution of social status in society will not be uniform.

Keywords: Social insurance; social norms; status; moral hazard (search for similar items in EconPapers)
JEL-codes: A14 C72 D81 D82 G28 H55 I38 J65 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1997-11-25
New Economics Papers: this item is included in nep-evo and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Economic Journal, 2001, pages 506-525.

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Journal Article: Social Norms and Moral Hazard (2001)
Working Paper: Social Norms and Moral Hazard (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:1997_028

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