A Meeting of the Minds: Informal Agreements and Social Norms

Erin L. Krupka (), Stephen Leider () and Ming Jiang ()
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Erin L. Krupka: School of Information, University of Michigan, Ann Arbor, Michigan 48109; Institute for the Study of Labor (IZA), D-53113 Bonn, Germany
Stephen Leider: Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109
Ming Jiang: Antai College of Economics and Management, Shanghai Jiao Tong University, 200240 Shanghai, China

Management Science, 2017, vol. 63, issue 6, 1708-1729

Abstract: Using coordination games, we elicit social norms directly for two different games where either an agreement to take the first best action has been reached or where no such agreement exists. We combine the norms data with separately measured choice data to predict changes in behavior. We demonstrate that including social norms as a utility component significantly improves predictive performance. Then we compare social norms to guilt aversion and lying aversion. We estimate that honoring an agreement in the double dictator game is worth giving up approximately 10% of total earnings and more than 120% in the Bertrand game. We show that informal agreements affect behavior through their direct effect on social norms as well as through an indirect effect on beliefs.

Keywords: economics; behavior and behavioral decision making; social norms; informal agreements (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (49)

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