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IZA Discussion Paper No. 7477
June 2013
Can Contracts Signal Social Norms? Experimental Evidence

revised version published in: Management Science, 2017, 63 (2), 459–476

We investigate whether incentive schemes signal social norms and thus affect behavior beyond their direct economic consequences. A principal-agent experiment is studied in which prior to contract choice principals are informed about past actions of other agents and thus have more information about "norms of behavior". Compared to a setting with uninformed principals agents exert nearly 50% higher efforts under a fixed wage contract when an informed principal had chosen this contract. Apparently the informed principal's choice signals a norm not to exploit the trust which leads to more trustworthy behavior. This mechanism's robustness is explored in further experiments.

Kommunikation
Mark Fallak
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+352 585-855-526
World of Labour
Olga Nottmeyer
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+352 585-855-501
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Christina Gathmann
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Das IZA@LISER-Netzwerk ist eine weltweite Gemeinschaft für exzellente Forschung in der Arbeitsmarktökonomie und angrenzenden Fachgebieten. Nach dem Wechsel von Bonn wird das Netzwerk nun am Luxembourg Institute of Socio-Economic Research (LISER) koordiniert.

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