Markets and socially responsible behavior: do punishment and religion matter?

Abstract

We use a set of lab-in-the-field experiments to study whether markets erode socially responsible behavior in a typical Sub-Saharan African country. In the first experiment, we randomly assign participants to a version of a game framed as a “market” context or as a “neutral” (non-market) context. Contrary to the prediction of pure self-interest theory, market participants exhibit considerable levels of socially responsible behavior. However, participants in the market context reveal a lower level of socially responsible behavior compared to the participants in the non-market contexts. We also report that punishment and religion play a significant role in promoting socially responsible behavior in markets. In a second experiment, we test whether the erosion of socially responsible behavior leads to anti-social behavior using the joy-of-destruction game. The results show that the erosion of socially responsible behavior triggers anti-social behavior. Finally, we look at welfare effects and find that our market baseline yields lower welfare compared to markets regulated by punishment mechanisms.