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Gun For Hire: Does Delegated Enforcement Crowd out Peer Punishment in Giving to Public Goods?

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  • James Andreoni
  • Laura K. Gee

Abstract

This paper compares two methods to encourage socially optimal provision of a public good. We compare the efficacy of vigilante justice, as represented by peer-to-peer punishment, to delegated policing, as represented by the “hired gun” mechanism, to deter free riding and improve group welfare. The “hired gun” mechanism (Andreoni and Gee, 2011) is an example of a low cost device that promotes complete compliances and minimal enforcement as the unique Nash equilibrium. We find that subjects are willing to pay to hire a delegated policing mechanism over 70% of the time, and that this mechanism increases welfare between 15% to 40%. Moreover, the lion’s share of the welfare gain comes because the hired gun crowds out vigilante peer-to-peer punishments.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17033.

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Date of creation: May 2011
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Handle: RePEc:nbr:nberwo:17033

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  1. David Dickinson & Marie-Claire Villeval, 2004. "Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories," Post-Print halshs-00175010, HAL.
  2. Marco Casari, 2005. "On the Design of Peer Punishment Experiments," Experimental Economics, Springer, vol. 8(2), pages 107-115, June.
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  4. Kosfeld, Michael & Okada, Akira & Riedl, Arno, 2006. "Institution Formation in Public Goods Games," Discussion Papers 2006-02, Graduate School of Economics, Hitotsubashi University.
  5. Jakub Steiner, 2005. "A Trace of Anger is Enough: On the Enforcement of Social Norms," CERGE-EI Working Papers wp246, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  6. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2001. "Monetary and Non-Monetary Punishment in the Voluntary Contributions Mechanism," Post-Print halshs-00151423, HAL.
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  8. 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, vol. 53(5), pages 495-511, July.
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  10. Fudenberg, Drew & Pathak, Parag A., 2010. "Unobserved punishment supports cooperation," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 78-86, February.
  11. Pablo Guillen & Christiane Schwieren & Gianandrea Staffiero, 2007. "Why feed the Leviathan?," Public Choice, Springer, vol. 130(1), pages 115-128, January.
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  13. Matthias Cinyabuguma & Talbot Page & Louis Putterman, 2006. "Can second-order punishment deter perverse punishment?," Experimental Economics, Springer, vol. 9(3), pages 265-279, September.
  14. Nikiforakis, Nikos, 2008. "Punishment and counter-punishment in public good games: Can we really govern ourselves," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 91-112, February.
  15. Rockenbach, Bettina & Wolff, Irenaeus, 2009. "Institution design in social dilemmas: How to design if you must?," MPRA Paper 16922, University Library of Munich, Germany.
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Cited by:
  1. Daniele Nosenzo & Martin Sefton, 2012. "Promoting Cooperation: the Distribution of Reward and Punishment Power," Discussion Papers 2012-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

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