We conduct an experiment where participants choose between actions that provide private benefits but may also impose losses on strangers. Three legal environments are compared: no law, strict liability for the harm caused to others, and an efficiently designed negligence rule where damages are...

We consider legal obligations against a background of social norms, e.g., societal norms, professional codes of conduct or business standards. Violations of the law trigger reputational sanctions insofar as they signal non-adherence to underlying norms, raising the issue of the design of...