Centre de recherche en économie de Grenoble

Abstract : The presence of externalities can create situations in which people take actions that are personally rewarding but socially costly. Policy and regulation are often imperfect in practice for solving problems created by externalities. A substantial body of literature, much of it experimental, investigates “bottom-up” solutions, whereby self-governance by groups of individuals improves efficiency by promoting good behavior, e.g., in social dilemmas (Kosfeld, Okada & Riedl, 2009; Ostrom, Walker & Gardner, 1994). However, it is less well understood the extent to which such self-governance can also be an effective instrument for promoting socially responsible conduct in markets. This talk covers two projects, involving laboratory studies, that investigate whether providing market actors with opportunities to self-organize and develop rules and norms that govern their market behavior, improves the efficiency and equality of market outcomes.