Mixing the Carrots with the Sticks: Are Punishment and Reward Substitutes
AbstractThis paper presents evidence that the demand for costly norm enforcement can be affected by the availability of the means for enforcing the norm. Participants in a laboratory experiment can reward or punish to enforce a distribution norm. Controlling for the extent of norm violation, we find that demand for costly punishment is lower when participants also have the opportunity to reward norm adherence. Similarly, demand for costly reward is lower when participants can punish norm violations, controlling for the extent of norm adherence. The reason is that participants use reward and punishment to signal their approval and disapproval. The availability of reward opportunities allows them to signal their disapproval by withholding reward. Similarly, the availability of punishment opportunities allows them to signal their approval by withholding punishment. This suggests that individuals consider reward and punishment to be substitutes. The resultant reduction in costly enforcement does not affect adherence to the norm, but has a significant impact on earnings in the experiment.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1119.
Length: 36 pages
Date of creation: 2011
Date of revision:
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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
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More information through EDIRC
punishment; reward; social norms; norm enforcement; third party;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-30 (All new papers)
- NEP-CBE-2011-04-30 (Cognitive & Behavioural Economics)
- NEP-EVO-2011-04-30 (Evolutionary Economics)
- NEP-EXP-2011-04-30 (Experimental Economics)
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