Sten Nyberg

Social Norms and Economic Incentives in the Welfare State

This paper analyzes the interplay between social norms and economic incentives in the context of work decisions in the modem welfare state. We assume that to live off ones own work is a social norm, and that the larger the population share adhering to this norm, the more intensely it is felt by the individual. Individuals face two choices: one economic, whether to work or live off public transfers; and one political, how large the transfer should be. The size of the transfer and the intensity of the social norm are determined endogenously in equilibrium.

Social Norms and Welfare State Dynamics

The paper analyses the interaction between economic incentives and work norms in the context of social insurance. If the work norm is endogenous in the sense that it is weaker when the population share of beneficiaries is higher, then voters will choose less generous benefits than otherwise. We also discuss welfare-state dynamics when there is a time lag in the adjustment of the norm in response to changes in this population share, and show how a temporary shift in the unemployment rate may cause persistence in the number of beneficiaries.

Vanity and Congestion: A Study of Reciprocal Externalities

This paper models a private goods oligopoly market characterized by negative and reciprocal externalities. Although firms compete in prices and products are undifferentiated in equilibrium, the price-cost margin turns out to be positive. From a social perspective, the equilibrium price is higher than what is motivated by the negative externality. Hence, welfare can be improved by means of a price ceiling. Finally, industries with high fixed costs would be expected to exhibit a high degree of concentration on the supply side and considerable price-cost margins. Copyright 1996 by The London School of Economics and Political Science.

The Honest Society: Stability and Policy Considerations

Abstract The social level of honesty is a public good that determines the feasibility of ventures subject to opportunism and the amount of resources devoted to safeguarding such activities. This paper examines equilibrium honesty in an evolutionary model where safeguards exhibit diminishing returns. The analysis shows that honesty-promoting policies, such as public provision and subsidization of safeguards, financed by uniform taxes, increase social welfare. By contrast, sharply increased safeguard costs, e.g. soaring litigation costs, may initiate a process of disintegration of honesty in society. Furthermore, hysteresis makes re-establishing honesty likely to be very costly.

Rent Control and Prices of Owner-Occupied Housing

We examine the relation between rent control and prices of owner-occupied housing in the presence of different qualities of housing. While a rent ceiling and the price of condominiums are substitutes if housing is undifferentiated, it is shown that this is not necessarily the case when housing differs in quality. A complete dismantling of rent control may in fact increase the price of condominiums. Copyright 2000 by The editors of the Scandinavian Journal of Economics.

Every Viewer has a Price: On the Differentiation of TV Channels

The authors analyzed the implications of targeted advertising on the equilibrium level of channel profile differentiation (e.g., in terms of political positioning), in free-to-air broadcasting industries. When consumers have no preferences over program content (e.g., entertainment vs. news) standard Hotelling type results apply. Market forces minimize differentiation while the optimal degree is at an intermediate level. As preferences over program content get somewhat stronger, the difference between optimal and market outcomes is initially reduced. However, when preferences over program content get more pronounced, minimal differentiation suddenly becomes optimal while market forces lead to excessive differentiation. Hence, policies aimed at increasing diversity are beneficial only when viewers care little about differences in program content.