Behavioural Effects of Obligations

Abstract

How formal rules affect human behaviour is a crucial issue in economics. Formal rules are defined as obligations backed by incentives. The economic literature has largely focused on the role of incentives in shaping individual behaviour. Yet, the role of obligations, i.e. what formal rules ask people to do or not to do, has been largely ignored. In this paper we run a public good game experiment to analyze the behavioural effects of obligations. We find evidence that obligations can affect cooperative behaviour both by coordinating conditional co-operators’ beliefs about others’ behaviour and by directly affecting preferences for cooperation. Our results shed a new light on the behavioural channels through which formal rules can affect individual behaviour. These findings suggest the opportunity to broaden the scope of analysis in order to gain a better understanding of the effects of institutions on economic outcomes.