Social norms, sanctions, and conditional entry in markets with externalities: Evidence from an artefactual field experiment

Abstract

In an artefactual field experiment with a large and heterogeneous population sample, we test the implications of social norms for market interactions associated with negative real-world externalities. We run large stylized markets in which sellers and buyers decide whether to enter the market and how much to bid for experimental coupons. Trading leads to profits for sellers and buyers but at the same time destroys donations for a good cause.Calculated over all our treatments, we observe that two-thirds of the participants refuse to trade. Eliciting a controlled measure for conditional moral behavior in one treatment, we find that roughly a quarter of potential traders make their decisions contingent on the decisions of others, indicating that the desire to conform to social norms affects trading decisions in markets with negative externalities. If observers can sanction traders, we find that more than 80% of them are willing to incur personal costs to sanction trading, thus enforcing a social norm for moral behavior.