We analyse an experimental public goods game in which group members can endogenously determine whether they want to supplement a standard voluntary contribution mechanism with the possibility of rewarding or punishing other group members. We find a large and positive effect of endogenous institutional choice on the level of cooperation in comparison to exogenously implemented institutions. This suggests that democratic participation rights enhance cooperation in groups. With endogenous choice, groups typically vote for the reward option, even though punishment is actually more effective in sustaining high levels of cooperation. Our results are evaluated against the predictions of social preference models.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
5497.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
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Gary Charness & Ramón Cobo-Reyes & Natalia Jiménez, 2006.
"An investment game with third-party intervention,"
ThE Papers
06/13, Department of Economic Theory and Economic History of the University of Granada..
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Kosfeld, Michael & Okada, Akira & Riedl, Arno, 2006.
"Institution Formation in Public Goods Games,"
Research Memoranda
029, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
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