We analyze the interactions between social norms, the prevalence of regulated acts, and policies. These interactions are impacted by people’s inability to directly observe actors’ behavior. Norms are ineffctive incentivizers when acts are committed either very frequently or very infrequently, because noisy signals of behavior are then too weak to alter people’s beliefs about others’ behavior. This cuts against the dynamics of the ‘honor-stigma’ model (Bénabou and Tirole 2006, 2011) and reverses its implications with even moderately noisy signals. With unobservable acts, the review process through which incentives are provided becomes an additional policy variable whose optima we characterize.
Claude Fluet : Université Laval, CRREP, CRED.
Murat C. Mungan : George Mason University, Antonin Scalia Law School.
For valuable comments and suggestions, we thank Jesse Bull, Ezra Friedman, Andreea Cosnita-Langlais, Carlos Oyarzun, Jennifer Reinganum, Sarath Sanga, Abraham Wickelgren, and the participants of the 7th Annual Law and Economic Theory Conference, the 2017 Economics Seminar at Université Paris Nanterre, the 2020 Soshnick Colloquium on Law and Economics at Northwestern Pritzker School of Law, and the 2020 University of Queensland Economic Theory Seminar.