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88 Tex. L. Rev. 1151 (2009-2010)
The Incentives Matrix: The Comparative Effectiveness of Rewards, Liabilities, Duties, and Protections for Reporting Illegality

handle is hein.journals/tlr88 and id is 1163 raw text is: Texas Law Review Volume 88, Number 6, May 2010 Articles The Incentives Matrix: The Comparative Effectiveness of Rewards, Liabilities, Duties, and Protections for Reporting Illegalityt Yuval Feldman* & Orly Lobel** Social enforcement is becoming a key feature of regulatory policy. Increasingly, statutes rely on individuals to report misconduct, yet the incentives they provide to encourage such enforcement vary significantly. Despite the clear policy benefits that flow from understanding the factors that facilitate social enforcement, i.e., the act of individual reporting of illegal behavior, the field remains largely understudied. Using a series of experimental surveys of a representative panel of over 2,000 employees, this Article compares the effect of different regulatory mechanisms-monetary rewards, protective rights, positive obligations, and liabilities-on individual motivation and behavior. By exploring the interplay between internal and external enforcement motivation, these experiments provide novel insights into the comparative advantages of legal mechanisms that incentivize compliance and social enforcement. At the policy-making level, the study offers important practicalfindings about the costs and benefits of different regulatory systems, including findings about inadvertent counterproductive effects of certain legal incentives. In particular, the findings t The experiments for this Article were supported by a generous grant from the ABA Section on Litigation Research Fund. We thank Larry Alexander, Tsilly Dagan, Lauren Edelman, Nicholas Epply, Shachar Lifshitz, Bryant Garth, Faina Milman, Jacob Nussim, Christine Parker, Gideon Parchomovsky, Oren Perez, Mark Schuman, Susan Sturm, Fred Zacharias, and the participants of faculty workshops at USD, Vanderbilt, Chicago-Kent, the Behavioral Law and Economics Conference, Haifa University, and the Berkeley Conference on Building Theory through Empirical Legal Studies, 2009, for their valuable comments. The paper has been accepted for presentation at the 2010 American Law and Economics Association (ALEA) meeting. We thank Tammy Shterental for statistical consulting and Michelle Butler, Augustine Trezeguet, and Amir Shani for research assistance. * Senior Lecturer, Faculty of Law, Bar-Ilan University. Ph.D. 2004, UC Berkeley; B.A., LL.B. 1998, Bar-Ilan University. ** Associate Professor, University of San Diego School of Law. S.J.D. 2006; LL.M. 2000, Harvard University; LL.B. 1998, Tel-Aviv University.

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