The Incentives Matrix: The Comparative Effectiveness of Rewards, Liabilities, Duties, and Protections for Reporting Illegality[dagger]

Social enforcement is becoming a key feature of regulatory policy. Increasingly, statutes rely on individuals to report misconduct, yet the incentives they provide to encourage such enforcement vary significantly. Despite the clear policy benefits that flow from understanding the factors that facili...

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Bibliographic Details
Published inTexas law review Vol. 88; no. 6; p. 1151
Main Authors Feldman, Yuval, Lobel, Orly
Format Journal Article
LanguageEnglish
Published Austin University of Texas, Austin, School of Law Publications, Inc 01.05.2010
Subjects
Behavior
Behavioral economics
Compliance
Design
Employees
Enforcement
Ethics
Experiments
Federal legislation
Fines & penalties
Gender differences
Impact analysis
Incentives
Law
Law enforcement
Monetary incentives
Morality
Motivation
Tax regulations
Whistleblowing
United States > US
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Summary:Social enforcement is becoming a key feature of regulatory policy. Increasingly, statutes rely on individuals to report misconduct, yet the incentives they provide to encourage such enforcement vary significantly. Despite the clear policy benefits that flow from understanding the factors that facilitate social enforcement, i.e., the act of individual reporting of illegal behavior, the field remains largely understudied. Using a series of experimental surveys of a representative panel of over 2,000 employees, this Article compares the effect of different regulatory mechanisms-monetary rewards, protective rights, positive obligations, and liabilities-on individual motivation and behavior. By exploring the interplay between internal and external enforcement motivation, these experiments provide novel insights into the comparative advantages of legal mechanisms that incentivize compliance and social enforcement. At the policy-making level, the study offers important practical findings about the costs and benefits of different regulatory systems, including findings about inadvertent counterproductive effects of certain legal incentives. In particular, the findings indicate that in some cases offering monetary rewards to whistle-blowers will lead to less, rather than more, reporting of illegality. At the more theoretical level, the findings contribute to several strands of inquiry, including motivational crowding-out effects, framing biases, the existence of a "holier-than-thou effect," and gender differences among social enforcers. Together, these findings portray a psychological schema that offers invaluable guidance for policy and regulatory design. [PUBLICATION ABSTRACT]
ISSN:0040-4411
1942-857X