Morality in the market

Tone Ognedal

Journal of Economic Behavior & Organization, 2016, vol. 129, issue C, 100-115

Abstract: Being honest can be a competitive disadvantage. In markets with the opportunity to violate laws and regulations, producers who are willing to cheat may crowd out more efficient producers who are honest, and buyers who are willing to cheat may crowd out honest buyers with higher willingness to pay. This mechanism makes morality (honesty) a bad substitute for sanctions in markets. Honesty reduces cheating, but the output may be less efficiently produced and less efficiently allocated among buyers. I also show that the effect of honesty depends crucially on the fraction of honest traders among both buyers and sellers. While it does not matter whether a buyer or a seller pays the sanction, it does matter who is honest.

Keywords: Morals; Sanctions; Tax evasion; Markets (search for similar items in EconPapers)
JEL-codes: H26 K42 L51 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268116301196
Full text for ScienceDirect subscribers only

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:eee:jeborg:v:129:y:2016:i:c:p:100-115

DOI: 10.1016/j.jebo.2016.06.010

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().