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Gun for hire: Delegated enforcement and peer punishment in public goods provision

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  • Andreoni, James
  • Gee, Laura K.

Abstract

This paper compares two methods to encourage socially optimal provision of a public good. We compare the efficacy of vigilante justice, as represented by peer-to-peer punishment, to delegated policing, as represented by the “hired gun” mechanism, to deter free riding and improve group welfare. Small self-governing organizations often place enforcement in the hands of an appointed leader—the department chair, the building superintendent, and the team captain. This hired gun, we show, need only punish the least compliant group member, and then only punish this person enough so that the person would have rather been the second least compliant. The hired gun mechanism is an example of a low cost device that promotes complete compliance as the unique Nash equilibrium. We find that subjects are willing to pay to hire a delegated policing mechanism over 70% of the time and that this mechanism increases welfare between 15% and 40%. Moreover, the lion's share of the welfare gain comes because the hired gun crowds out vigilante peer-to-peer punishments.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 96 (2012)
Issue (Month): 11 ()
Pages: 1036-1046

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Handle: RePEc:eee:pubeco:v:96:y:2012:i:11:p:1036-1046

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Public goods; Experiment; Group behavior; Punishment; Free riding; Peer punishment;

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References

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Cited by:
  1. M. D. Farjam & M. Faillo & W.F.G. Haselager & I.G. Sprinkhuizen-Kuyper, 2013. "Punishment Mechanisms and their Effect on Cooperation - A Simulation Study," CEEL Working Papers 1302, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
  2. Boyu Zhang & Cong Li & Hannelore Silva & Peter Bednarik & Karl Sigmund, 2014. "The evolution of sanctioning institutions: an experimental approach to the social contract," Experimental Economics, Springer, vol. 17(2), pages 285-303, June.
  3. Kocher, Martin G. & Tan, Fangfang & Yu, Jing, 2014. "Providing global public goods: Electoral delegation and cooperation," Discussion Papers in Economics 21163, University of Munich, Department of Economics.
  4. Kamijo, Y. & Nihonsugi, T. & Takeuchi, A. & Funaki, Y., 2014. "Sustaining cooperation in social dilemmas: Comparison of centralized punishment institutions," Games and Economic Behavior, Elsevier, vol. 84(C), pages 180-195.
  5. Daniela Grieco & Marco Faillo & Luca Zarri, 2013. "Top Contributors as Punishers," Working Papers 24/2013, University of Verona, Department of Economics.
  6. Fangfang Tan & Erte Xiao, 2014. "Third-Party Punishment: Retribution or Deterrence?," Working Papers tax-mpg-rps-2014-05, Max Planck Institute for Tax Law and Public Finance.

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