The Corporate Legality Game A Lab Experiment on The Impact of Policies, Frames and Information

Leonardo Becchetti, Vittorio Pelligra and Fiammetta Rossetti

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: A company that pursues illicit practices (e.g., money laundering, tax dodging, corruption of public officials in procurement races, etc.) may underprice and crowd out competitors that behave legally, thereby eroding the public good of legality and integrity. Recently born institutional legality ratings tackle this problem by signaling companies with excellent legality record to consumers. Redistributive policy actions aimed to tax "defectors" (i.e. buyers of unrated products) in favor of "co-operators" (i.e. buyers of "legality-rated" products) may further enforce legality, and fight corruption. We analyze the impact of the legality-rating frame by means of a randomized experiment. The experiment accounts for the effects of fiscal policies that redistribute income from defectors to co-operators either in presence or in absence of the legality frame. Our findings document that the redistribution mechanism, the legality frame and the conformity information design contribute to alleviate the prisoner's dilemma and generate significant deviations from the Nash Equilibrium.

Keywords: Analysis of Collective Decision-Making; Corruption; Laboratory Experiment; Redistribution; conformity (search for similar items in EconPapers)
JEL-codes: C92 D7 D73 H2 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: The Corporate Legality Game A Lab Experiment on the Impact of Policies, Frames and Information (2023)
Working Paper: The Corporate Legality Game. A Lab Experiment on The Impact of Policies, Frames and Information (2016)
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