Institutions, Shared Guilt, and Moral Transgression

Abstract

This paper studies the influence of shared guilt and diffused responsibility in institutions that may require the support of several actors to realize specific outcomes. Decision makers weigh supporting an immoral yet egoistically advantageous action to the detriment of a third party against preventing such transgression. Following results from social psychology and economic experiments, we assume that guilt is shared and thereby diffused among supporters. It is hence easier for a decision maker to support a transgression if he knows that the transgression can only occur if several people support it. Nevertheless, as the transgression causes feelings of guilt in those who supported it, while the egoistic advantages out of transgression are enjoyed by all decision makers, people will try to free-ride on each other, hoping that the support will come from others. Assuming that people differ in their private, individual levels of guilt, we study how institutional design causally affects the willingness to support immoral activity and outcomes. Depending on the population size and number of supporters required, moral transgression may occur or be prevented. Our results are robust to several conceptions of guilt. We furthermore compare our findings to the (also novel) results if guilt cannot be shared.