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Deterrence by Imperfect Sanctions – A Public Good Experiment

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  • Christoph Engel

    ()
    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

Sanctions are often so weak that a money maximizing individual would not be deterred. In this paper I show that they may nonetheless serve a forward looking purpose if sufficiently many individuals are averse against advantageous inequity. Using the Fehr/Schmidt model (QJE 1999) I define three alternative channels: (a) identical preferences are common knowledge, but inequity is not pronounced enough to sustain cooperation; (b) heterogeneous preferences are common knowledge; (c) there is preference uncertainty. In a linear public good with punishment meted out by a disinterested participant, I test two implications of the model: (a) participants increase contributions in reaction to imperfect punishment; (b) imperfect punishment helps sustain cooperation if participants experience free-riding

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Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2013_09.

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Date of creation: May 2013
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Handle: RePEc:mpg:wpaper:2013_09

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Keywords: Deterrence; Public Good Experiment; Inequity Aversion; imperfect sanction; Fehr/Schmidt preferences; centralized punishement;

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