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The Carrot or the Stick: Rewards, Punishments, and Cooperation

  • James Andreoni
  • William Harbaugh
  • Lise Vesterlund

We examine rewards and punishments in a simple proposer-responder game. The proposer first makes an offer to split a fixed-sized pie. According to the 2×2 design, the responder is or is not given a costly option of increasing or decreasing the proposer's payoff. We find substantial demands for both punishments and rewards. While rewards alone have little influence on cooperation, punishments have some. When the two are combined the effect on cooperation is dramatic, suggesting that rewards and punishments are complements in producing cooperation. Providing new insights to what motivates these demands is the surprising finding that the demands for rewards depend on the availability of punishments.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 3 (June)
Pages: 893-902

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Handle: RePEc:aea:aecrev:v:93:y:2003:i:3:p:893-902
Note: DOI: 10.1257/000282803322157142
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  1. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
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  1. Carrot and stick in Wikipedia English ne '')
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