Optimal Contracting with Endogenous Social Norms
Paul Fischer and
Steven Huddart
American Economic Review, 2008, vol. 98, issue 4, 1459-75
Abstract:
Research in sociology and ethics suggests that individuals adhere to social norms of behavior established by their peers. Within an agency framework, we model endogenous social norms by assuming that each agent’s cost of implementing an action depends on the social norm for that action, defined to be the average level of that action chosen by the agent’s peer group. We show how endogenous social norms alter the effectiveness of monetary incentives, determine whether it is optimal to group agents in a single or two separate organizations, and may give rise to a costly adverse selection problem when agents' sensitivities to social norms are unobservable. (JEL D23, D82, D86, Z13)
JEL-codes: D23 D82 D86 Z13 (search for similar items in EconPapers)
Date: 2008
Note: DOI: 10.1257/aer.98.4.1459
References: Add references at CitEc
Citations: View citations in EconPapers (101)
Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.98.4.1459 (application/pdf)
http://www.aeaweb.org/aer/data/sept08/20040399_app.pdf (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:98:y:2008:i:4:p:1459-75
Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().