A Model of Categorical Norms, Plausible Deniability and other Quirky Features of Socially Enforced Norms.

Résumé

In many instances, moral hazard can be curtailed via deterrence mechanisms that a governing body can unilaterally enforce and commit to follow through on. However, in many other instances, good behavior is induced via coordinated punishment, such as when democratic norms are maintained via the threat of public protests, or when international norms are maintained via the threat of multi-lateral sanctions. We present a stylized model of such coordinated punishment, using information structures, and a state-independent coordination game, then formalize a fundamental role of higher order beliefs. We apply this result to specific information structures, such as one reminiscent of global games, and another basic signal structure that captures the role of observability and correlation of signals, in order to formalize the relevance of “categorical norms” (like the norm against chemical weapons), and “plausible deniability” (as in the omission-commission distinction).