Carry a big stick, or no stick at all An experimental analysis of trust and capacity of punishment
AbstractWe investigate the effect of punishment in a trust game with endowment heterogeneity in which the investor may punish the allocator at a cost. Our results indicate that the effect of the punishment crucially depends on the investor’s capacity of punishment, that is measured in our experiment by the proportion of the allocator’s payoffs that the investor can destroy. We find that punishment fosters trust when the capacity of punishment is high (i.e., when the cost of punishing is relatively low). Otherwise, punishment fails to promote trusting behavior, crowding out intrinsic motivation to trust. Trustworthiness is higher with punishment than without punishment, except if investors have a high capacity of punishment
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Bibliographic InfoPaper provided by University of Valencia, ERI-CES in its series Discussion Papers in Economic Behaviour with number 0413.
Date of creation: Aug 2013
Date of revision:
Trust game; punishment; crowding-out; intrinsic and extrinsic motivation; experimental economics;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D69 - Microeconomics - - Welfare Economics - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-10 (All new papers)
- NEP-CBE-2013-08-10 (Cognitive & Behavioural Economics)
- NEP-EVO-2013-08-10 (Evolutionary Economics)
- NEP-EXP-2013-08-10 (Experimental Economics)
- NEP-GTH-2013-08-10 (Game Theory)
- NEP-HRM-2013-08-10 (Human Capital & Human Resource Management)
- NEP-SOC-2013-08-10 (Social Norms & Social Capital)
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