A theory of norm compliance: Punishment and reputation

Why do not social norms simply collapse from the violation? This paper analyzes two distinct mechanisms on norm compliance: punishment and reputation. The model considers two groups of agents in a society with one norm. Agents in one group choose whether to comply with the norm, while agents in the other group potentially punish opponents who violate the norm. The paper investigates two scenarios to account for the long-run stability of the norm. In one scenario, the norm is enforced due to a higher level of punishment of the violation. In another scenario, everyone is motivated due to reputation formation, despite a lower level of punishment by others. The interaction of two mechanisms provides a convenient way to norm compliance. (C) 2013 Elsevier Inc. All rights reserved.