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State or Nature? Formal vs. Informal Sanctioning in the Voluntary Provision of Public Goods

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Author Info

  • Kenju Kamei

    (Brown University)

  • Louis Putterman

    (Brown University)

  • Jean-Robert Tyran

    (University of Vienna)

Abstract

The sanctioning of norm-violating behavior by an effective formal authority is an efficient solution for social dilemmas. It is in the self-interest of voters and is often favorably contrasted with letting citizens take punishment into their own hands. Allowing informal sanctions, by contrast, not only comes with a danger that punishments will be misapplied, but also should have no efficiency benefit under standard assumptions of self-interested agents. We experimentally investigate the relative effectiveness of formal vs. informal sanctions in the voluntary provision of public goods. Unsurprisingly, we find that effective formal sanctions are popular and efficient when they are free to impose. Surprisingly, we find that informal sanctions are often more popular and more efficient when effective formal sanctions entail a modest cost. The reason is that informal sanctions achieve more efficient outcomes than theory predicts, especially when the mechanism is chosen by voting.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 11-05.

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Length: 36 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:kud:kuiedp:1105

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Keywords: sanction; social dilemma; public goods; voluntary contribution mechanism; punishment; experiment;

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References

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  1. Thomas Markussen & Louis Putterman & Jean-Robert Tyran, 2011. "Self-Organization for Collective Action: An Experimental Study of Voting on Formal, Informal, and No Sanction Regimes," Discussion Papers 11-04, University of Copenhagen. Department of Economics.
  2. Noussair, C.N. & Masclet, D. & Tucker, S. & Villeval, M..C, 2003. "Monetary and non-monetary punishment in the voluntary contributions mechanism," Open Access publications from Tilburg University urn:nbn:nl:ui:12-377951, Tilburg University.
  3. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, Springer, vol. 10(2), pages 171-178, June.
  4. Ananish Chaudhuri, 2011. "Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature," Experimental Economics, Springer, Springer, vol. 14(1), pages 47-83, March.
  5. Nikos Nikiforakis & Hans-Theo Normann, 2008. "A comparative statics analysis of punishment in public-good experiments," Experimental Economics, Springer, Springer, vol. 11(4), pages 358-369, December.
  6. Sutter, Matthias & Haigner, Stefan & Kocher, Martin G., 2010. "Choosing the Carrot or the Stick? Endogenous Institutional Choice in Social Dilemma Situations," Munich Reprints in Economics, University of Munich, Department of Economics 18193, University of Munich, Department of Economics.
  7. Sebastian Kube & Christian Traxler, 2011. "The Interaction of Legal and Social Norm Enforcement," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(5), pages 639-660, October.
  8. Thöni, Christian & Tyran, Jean-Robert & Wengström, Erik, 2012. "Microfoundations of social capital," Journal of Public Economics, Elsevier, Elsevier, vol. 96(7-8), pages 635-643.
  9. Martin Sefton & Robert Shupp & James M. Walker, 2007. "The Effect Of Rewards And Sanctions In Provision Of Public Goods," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 671-690, October.
  10. Talbot Page & Louis Putterman & Bulent Unel, 2005. "Voluntary Association in Public Goods Experiments: Reciprocity, Mimicry and Efficiency," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(506), pages 1032-1053, October.
  11. Ones, Umut & Putterman, Louis, 2007. "The ecology of collective action: A public goods and sanctions experiment with controlled group formation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 62(4), pages 495-521, April.
  12. Louis Putterman & Jean-Robert Tyran & Kenju Kamei, 2010. "Public Goods and Voting on Formal Sanction Schemes: An Experiment," Working Papers 2010-1, Brown University, Department of Economics.
  13. Nikos Nikiforakis, 2010. "Experimental Economics," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 337-345.
  14. Pedro Dal Bo & Andrew Foster & Louis Putterman, 2007. "Institutions and Behavior: Experimental Evidence on the Effects of Democracy," Working Papers 2007-9, Brown University, Department of Economics.
  15. Laurent Denant-Boemont & David Masclet & Charles Noussair, 2007. "Punishment, counterpunishment and sanction enforcement in a social dilemma experiment," Economic Theory, Springer, Springer, vol. 33(1), pages 145-167, October.
  16. Matthias Cinyabuguma & Talbot Page & Louis Putterman, 2006. "Can second-order punishment deter perverse punishment?," Experimental Economics, Springer, Springer, vol. 9(3), pages 265-279, September.
  17. Nikiforakis, Nikos, 2008. "Punishment and counter-punishment in public good games: Can we really govern ourselves," Journal of Public Economics, Elsevier, Elsevier, vol. 92(1-2), pages 91-112, February.
  18. Ertan, Arhan & Page, Talbot & Putterman, Louis, 2009. "Who to punish? Individual decisions and majority rule in mitigating the free rider problem," European Economic Review, Elsevier, Elsevier, vol. 53(5), pages 495-511, July.
  19. Anabela Botelho & Glenn W. Harrison & Lígia Pinto & Elisabet E. Rutstrom, 2005. "Social norms and social choice," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 30, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  20. Jennifer Zelmer, 2003. "Linear Public Goods Experiments: A Meta-Analysis," Experimental Economics, Springer, Springer, vol. 6(3), pages 299-310, November.
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Citations

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Cited by:
  1. Kamei, Kenju, 2014. "Promoting Competition or Helping Less-Endowed? An Experiment on Collective Institutional Choices under Intra-Group Inequality," MPRA Paper 56774, University Library of Munich, Germany.
  2. Thomas Markussen & Louis Putterman & Jean-Robert Tyran, 2011. "Self-Organization for Collective Action: An Experimental Study of Voting on Formal, Informal, and No Sanction Regimes," Working Papers 2011-4, Brown University, Department of Economics.
  3. Kamei, Kenju, 2012. "From locality to continent: A comment on the generalization of an experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 41(2), pages 207-210.
  4. 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, Springer, vol. 17(2), pages 285-303, June.

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