How Laws Affect Behavior: Obligations, Incentives and Cooperative Behavior

Abstract

Laws and other formal rules are ‘obligations backed by incentives’. In this paper we explore how formal rules affect cooperative behaviour. Our analysis is based on a series of modified experimental public good games designed to isolate the impact of exogenously requested minimum contributions (obligations) from those of marginal incentives backing them. We find that obligations have a sizeable effect on cooperative behaviour even in absence of incentives. When non-binding incentives are introduced, requested contributions strongly sustain cooperation. Therefore, in contrast with cases in which incentives crowdout cooperative behaviour, in our experiments obligations and incentives are complements, jointly supporting high levels of contributions. Moreover, we find that variations in obligations affect behaviour even when incentives are held constant. Finally, we explore the behavioural channels of the previous results, finding that both people’s beliefs about others’ contributions and willingness to cooperate are called into play.