Meeting by Signals, Playing by Norms: Complementary Accounts of Non-Legal Cooperation in Institutions
Posted: 19 Jun 2002
This Essay on Eric Posner's "Law and Social Norms" examines the extent to which signaling theory can provide a model for understanding non-legally enforced cooperation within institutions. After reviewing the signaling model upon which Posner's book is based, we take the employment relationship in firms as a case study. We argue that while signaling theory may be useful in explaining the formation of that relationship, it does not provide a basis for understanding its observed regularities, or of the very limited role played by the legal rules in rendering the relationship "incentive compatible." We conclude that our analysis and Posner's focus on different aspects of similar phenomena and are complementary rather than competing theories.
JEL Classification: J2, M14, Z13
Suggested Citation: Suggested Citation