Testing the Focal Point Theory of Legal Compliance: The Effect of Third‐Party Expression in an Experimental Hawk/Dove Game

• Published date: 01 March 2005
• DOI: http://doi.org/10.1111/j.1740-1461.2005.00032.x
• Date: 01 March 2005
• Author: Janice Nadler,Richard H. McAdams

Testing the Focal Point Theory

of Legal Compliance: The Effect

of Third-Party Expression in an

Experimental Hawk/Dove Game

Richard H. McAdams and Janice Nadler*

Economic theories of legal compliance emphasize legal sanctions, whereas

psychological and sociological theories stress the perceived legitimacy of

law. Without disputing the importance of either mechanism, we test a third

way that law affects behavior, an expressive theory that claims law influences

behavior by creating a focal point around which individuals coordinate. We

investigated how various forms of third-party “cheap talk” influence the

behavior of subjects in a Hawk/Dove or Chicken game. Despite the players’

conflicting interests, we found that messages highlighting an equilibrium

tend to produce that outcome. Most striking, this result emerged even when

the message was selected by an overtly random, mechanical process. We

obtained a similar result when the message was delivered by a third-party

subject; the latter effect was significantly stronger than the former only

when the subject speaker was selected by a merit-based process. These

results suggest that, in certain circumstances, law generates compliance not

only by sanctions and legitimacy, but also by facilitating coordination

around a focal outcome.

87

*Address correspondence to Richard H. McAdams, University of Illinois College of Law, 504 E.

Pennsylvania Ave., Champaign, IL 61820; phone: 217-333-4385; email: rmcadams@law.uiuc.edu;

Janice Nadler, American Bar Foundation & Northwestern University School of Law, 357 E.

Chicago Ave., Chicago, IL 60611; phone: 312-503-3228; email: jnadler@northwestern.edu.

For their comments on an earlier draft, the authors thank Rachel Croson, Dhammika

Dharmapala, Shari Diamond, Tom Ginsburg, Tom Miles, Jeff Rachlinski, Larry Ribstein, Tom

Ulen, members of the research committees of the American Bar Foundation, and the partici-

pants at law faculty workshops at Connecticut, Florida State, Northwestern, and Virginia and at

the law and economics workshop at Michigan. We also thank Emily Solberg for research assis-

tance. We thank the American Bar Foundation, the Dispute Resolution Research Center of

Northwestern University, Northwestern University School of Law, and the National Science

Foundation for research support. This research was supported by National Science Foundation

Grant SES-0351530.

Journal of Empirical Legal Studies

Volume 2, Issue 1, 87–123, March 2005

I. Introduction

Law-and-economics theorists commonly view law as a tool for facilitating

cooperation. Legal sanctions change incentives so that individuals will not

defect from Pareto-optimal arrangements. Another important but neglected

effect of law is to facilitate coordination. Because of the publicity commonly

given to and expected for law, legal pronouncements can create common

knowledge about governmental expectations. Even aside from the sanctions

government uses to enforce its expectations, in a coordination situation, a

legal pronouncement can make the prescribed outcome salient or “focal,”

thereby creating self-fulfilling expectations that this outcome will occur.

Broadcasting the rule “drive on the right,” for example, is likely to prompt

some compliance independent of the threat of legal sanctions, merely

because the common knowledge that everyone heard this particular message

makes the named behavior focal.

It is exceedingly easy to overlook this coordinating power of law. One

reason is that two other explanations have long dominated theory and

empiricism on the subject of legal compliance. Most economic analysis

assumes that sanctions are the sole mechanism by which law achieves com-

pliance (via deterrence or incapacitation), while most psychological and

sociological theories emphasize the perceived legitimacy of law as the primary

explanation for compliance (via social and institutional reinforcement of

moral norms). The debate between these camps obscures the possibility of

any alternative. In addition, the common joinder of law with sanctions and

legitimacy makes it extraordinarily difficult to discern whether law has a

power independent of these forces. Finally, even if one is prepared to look

beyond the two prevailing theories, the problem of coordinating among

multiple equilibria stands a bit outside the mainstream of game theory that

is applied to law. Indeed, many law-and-economics scholars think of coordi-

nation as relevant to only a narrow domain of social life that does not include

the conflict that law seeks to resolve.

Despite this resistance, a few theorists have offered coordination as

another mechanism for generating legal compliance, a third reason why

people obey law (Cooter 1998; Garrett & Weingast 1993; Hardin 1989; Hay

& Shleifer 1998:400–01; McAdams 2000a; Posner 2000:177–79). These coor-

dination explanations employ rational choice tools and, like other economic

theories, avoid complex notions of legitimacy. Despite these differences from

psychological and sociological approaches, however, coordination theories

88 Testing the Focal Point Theor y of Legal Compliance

similarly conclude that law can generate some compliance expressively, apart

from its sanctions. Without denying the power of sanctions or legitimacy, the

coordination explanation claims that law influences behavior independently

of either. (There are also rational choice explanations of the expressive

power of law that do not rely on coordination. See, e.g., Dharmapala &

McAdams 2003; McAdams 2000b; Kahan 2000.)

There has, however, been little empirical testing of these novel theo-

ries. Though several experiments document the power of recommendations

in “conflict-free” coordination games (where subjects agree on what

equilibrium is best), law commonly addresses coordination situations with

genuine conflict (where subjects rank the equilibria differently). There has

been almost no testing of the claim that mere “cheap talk” from third parties

can influence behavior in such games. To remedy this gap, we conducted an

experiment to examine whether and how cheap-talk messages influence play

in a Hawk/Dove game. Here, we present our findings, which support the

claim that third-party expression can by itself influence behavior in coordi-

nation situations that model legal disputes. We emphasize two points about

the relationship of the current study to the larger topic of legal compliance.

First, by testing an expressive theory, we do not imply a rejection of com-

pliance theories that emphasize sanctions or legitimacy. Second, by testing

a coordination theory, we do not imply a rejection of other expressive the-

ories. Indeed, we identify below the limited domain in which coordination

theories apply.

This article proceeds as follows. Section II sets forth the coordination

or focal point explanation of law’s expressive power. Section III reviews the

relevant empirical literature on the subject. Section IV describes our exper-

iment. Section V concludes.

II. Coordination Theories of Expressive Law

There is a recent turn in applied game theory toward the importance of

coordination. This new work focuses not on the simple but rare pure coor-

dination game (such as the choice of driving on the left or right side of

the road), but on “mixed-motive” games (Schelling 1960) that combine an

element of conflict with a common interest in coordination. We provide

examples below. For a theory of legal expression, the key is that these games

have multiple equilibria—two or more outcomes that satisfy the Nash crite-

McAdams and Nadler 89