Negative economic shocks and the compliance to social norms

Abstract

We study why suffering a negative economic shock, i.e., a significant loss, may trigger a change in other-regarding behavior. We conjecture that people trade off concern for money with a conditional preference to follow social norms and that suffering a shock makes extrinsic motivation more salient, leading to more norm violation. This hypothesis is grounded on the premise that preferences are norm-dependent. We study this question experimentally: after administering losses on the earnings from a real-effort task, we analyze choices in prosocial and antisocial settings. To derive our predictions, we elicit social norms for each context analyzed in the experiments. We find evidence that shock increases deviations from norms.