Eeckhout, Jan: Competing Norms of Cooperation
World Conference Econometric Society, 2000, Seattle

Jan Eeckhout, University of Pennsylvania
Competing Norms of Cooperation
Session: C-7-3  Sunday 13 August 2000  by Eeckhout, Jan
A key question concerning social norms is whether norms that are bad for its members can survive. This paper argues that when identical workers have the outside option to join a competing firm with a different norm, good norms can exist only in the presence of bad norms. With non contractible effort, agents cannot credibly commit to cooperation when all outside options are equally good. This is proposed as a rationale for endogenous stratification of coexisting norms and corporate cultures. The framework naturally gives rise to authority relations within firms: seniors earn higher wages than entering juniors. However, authority is limited and does not eradicate the stratification of norms.
Submitted paper full-text in .pdf


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