In this paper, we compare the cause and effect of immaterial rewards and sanctions oncooperation in a voluntary contributions experiment. We find that both rewards andsanctions increase contributions only when subjects interact repeatedly, though rewardsseem to be more effective than sanctions. Moreover, in contrast to sanctions, rewards dohave an impact on future contributions. Although the direct effect is negative, there is apositive indirect effect that applies to subjects who contribute above (below) the groupaverage in a partner (stranger) matching. From this we conclude that sanctions andrewards are mainly used as a communication channel to coordinate on a more efficientoutcome. Nevertheless, subjects also seem to experience additional utility from receivingapproval, whereas they are insensitive to disapprovals.
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Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number
005.
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