Do Markets Undermine Moral Values? (with Ernst Fehr and Yagiz Özdemir)

Björn Bartling, Professor of Economics, University of Zurich is this week’s guest speaker (4 April) in the SWE Colloquium, addressing the question “Do markets undermine moral values”. This centers on the debate about the role of markets for moral values by comparing behavior in experimental market and non-market environments. First, we show that repeated play rather than market environments undermines moral values in bilateral interactions, which calls into question earlier results in the literature and points to the importance of moral licensing effects. Second, we show that moral behavior in markets is robust to competitive pressure and the concomitant moral excuse “if I don’t do it, someone else will”. Third, we find that moral behavior is diminished as markets grow larger and identify the underlying mechanisms by disentangling the roles of endogenous matching opportunities and social information.