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Imperfect public monitoring with costly punishment - An experimental study

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  • Attila Ambrus

    ()
    (Department of Economics, Harvard University)

  • Ben Greiner

    ()
    (School of Economics, The University of New South Wales)

Abstract

This paper experimentally investigates the effects of a costly punishment option on cooperation and social welfare in long finitely repeated public good contribution games. In a perfect monitoring environment increasing the severity of the potential punishment monotonically increases both contributions and the average net payoffs of subjects. In a more realistic imperfect monitoring environment, we find a U-shaped relationship between the severity of punishment and average net payoffs. Access to a standard punishment technology in this setting significantly decreases net payoffs, even in the long run. Access to a very severe punishment technology leads to roughly the same payoffs as with no punishment option, as the benefits of increased cooperation offset the social costs of punishing.

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File URL: http://research.economics.unsw.edu.au/RePEc/papers/2011-10.pdf
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Bibliographic Info

Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2011-10.

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Length: 24 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:swe:wpaper:2011-10

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Keywords: public good contribution experiments; imperfect monitoring; welfare implications of costly punishment;

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References

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  1. Fudenberg, Drew & Dreber, Anna & Rand, David G. & Nowak, Martin, 2008. "Winners Don't Punish," Scholarly Articles 2252594, Harvard University Department of Economics.
  2. Yoella Bereby-Meyer & Alvin E. Roth, 2006. "The Speed of Learning in Noisy Games: Partial Reinforcement and the Sustainability of Cooperation," American Economic Review, American Economic Association, vol. 96(4), pages 1029-1042, September.
  3. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  4. Cason, Timothy N. & Khan, Feisal U., 1999. "A laboratory study of voluntary public goods provision with imperfect monitoring and communication," Journal of Development Economics, Elsevier, vol. 58(2), pages 533-552, April.
  5. Sainty, Barbara, 1999. "Achieving greater cooperation in a noisy prisoner's dilemma: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 421-435, July.
  6. Aoyagi, Masaki & Fréchette, Guillaume, 2009. "Collusion as public monitoring becomes noisy: Experimental evidence," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1135-1165, May.
  7. Nikos Nikiforakis, 2010. "Experimental Economics," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 337-345.
  8. Bolton, Gary E. & Katok, Elena & Ockenfels, Axel, 2005. "Cooperation among strangers with limited information about reputation," Journal of Public Economics, Elsevier, vol. 89(8), pages 1457-1468, August.
  9. Klaus Abbink & Abdolkarim Sadrieh, 2008. "The Pleasure of Being Nasty," FEMM Working Papers 08037, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  10. Sung-Ha Hwang & Samuel Bowles, 2011. "Is Altruism Bad for Cooperation?," Working Papers 1114, Research Institute for Market Economy, Sogang University.
  11. Rand, David Gertler & Dreber, Anna & Fudenberg, Drew & Ellingson, Tore & Nowak, Martin A., 2009. "Positive Interactions Promote Public Cooperation," Scholarly Articles 3804483, Harvard University Department of Economics.
  12. Kahn, Lawrence M. & Murnighan, J. Keith, 1993. "Conjecture, uncertainty, and cooperation in prisoner's dilemma games : Some experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 22(1), pages 91-117, September.
  13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  14. Patel, Amrish & Cartwright, Edward & Mark, Van Vugt, 2010. "Punishment Cannot Sustain Cooperation in a Public Good Game with Free-Rider Anonymity," Working Papers in Economics 451, University of Gothenburg, Department of Economics.
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Cited by:
  1. Auerswald, Heike & Schmidt, Carsten & Thum, Marcel & Torsvik, Gaute, 2013. "Teams punish less," Working Papers in Economics 08/13, University of Bergen, Department of Economics.
  2. Bucciol, Alessandro & Montinari, Natalia & Piovesan, Marco, 2014. "It Wasn't Me! Visibility and Free Riding in Waste Sorting," Working Papers 2014:17, Lund University, Department of Economics.
  3. Bernd Irlenbusch & Rainer Michael Rilke, 2013. "(Public) Good Examples - On the Role of Limited Feedback in Voluntary Contribution Games," Cologne Graduate School Working Paper Series 04-04, Cologne Graduate School in Management, Economics and Social Sciences.
  4. Alexia Gaudeul & Paolo Crosetto & Gerhard Riener, 2014. "Fear of being left alone drives inefficient exit from partnerships. An experiment," Jena Economic Research Papers 2014-012, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  5. Simon Gächter, 2014. "Human Pro-Social Motivation and the Maintenance of Social Order," Discussion Papers 2014-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  6. Sven Fischer & Kristoffel Grechenig & Nicolas Meier, 2013. "Cooperation under punishment: Imperfect information destroys it and centralizing punishment does not help," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2013_06, Max Planck Institute for Research on Collective Goods.
  7. Daniela Grieco & Marco Faillo & Luca Zarri, 2013. "Top Contributors as Punishers," Working Papers 24/2013, University of Verona, Department of Economics.
  8. Engelmann, Dirk & Nikiforakis, Nikos, 2013. "In the long-run we are all dead: On the benefits of peer punishment in rich environments," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79743, Verein für Socialpolitik / German Economic Association.
  9. Noussair, Charles & van Soest, Daan & Stoop, Jan, 2011. "Punishment, reward, and cooperation in a framed field experiment," MPRA Paper 34067, University Library of Munich, Germany.
  10. Daniele Nosenzo & Theo Offerman & Martin Sefton & Ailko van der Veen, 2014. "Discretionary Sanctions and Rewards in the Repeated Inspection Game," Discussion Papers 2014-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  11. Paolo Crosetto & Alexia Gaudeul & Gerhard Riener, 2012. "Partnerships, Imperfect Monitoring and Outside Options: Theory and Experimental Evidence," Jena Economic Research Papers 2012-052, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  12. Catherine Roux & Christian Thöni, 2013. "Collusion Among Many Firms: The Disciplinary Power of Targeted Punishment," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 13.02, Université de Lausanne, Faculté des HEC, DEEP.

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