Formal and Informal Enforcement Mechanisms: The Substitution and Complementary Effects
34 Pages Posted: 27 May 2008
Date Written: May 24, 2008
Abstract
We propose that formal and informal enforcement mechanisms have a substituting as well as complementing effect. Building on the literature on cooperation in the provision F public good, we argue that the effectiveness of punishment vs. protection as a formal mechanism hinges on the extent to which we are more tempted or apprehensive, which is shaped by the configuration of the informal context of trust and time horizon. We test our arguments in a public goods experiment. We address the substituting effect of formal and informal enforcements mechanisms by demonstrating that each can enhance public good contributions. We address the complementing effect by demonstrating that the effectiveness of formal enforcement mechanisms depends on the configuration of the informal ones along trust and time horizon.
Keywords: Trust, Time horizon, Formal enforcement, Informal enforcement, Punishment, Protection
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Relational Contracts and the Nature of Market Interactions
By Martin Brown, Armin Falk, ...
-
Truth or Consequences: An Experiment
By Jordi Brandts and Gary Charness
-
Do Labour Market Conditions Affect Gift Exchange? Some Experimental Evidence
By Jordi Brandts and Gary Charness
-
Contractual Incompleteness and the Nature of Market Interactions
By Martin Brown, Armin Falk, ...
-
Contractual Incompleteness and the Nature of Market Interactions
By Martin Brown, Armin Falk, ...
-
Putting Reciprocity to Work - Positive Versus Negative Responses in the Field
By Sebastian Kube, Michel André Maréchal, ...
-
A Behavioral Account of the Labor Market: The Role of Fairness Concerns
By Ernst Fehr, Lorenz Goette, ...
-
A Behavioral Account of the Labor Market: The Role of Fairness Concerns
By Ernst Fehr, Lorenz Goette, ...