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Leading-by-example and third-party punishment: Experimental evidence

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  • Heim, Réka
  • Huber, Jürgen

Abstract

In this paper we explore how decisions in a sequential three-person game are influenced by either dynamics of roles or group composition. In the game a dictator decides how much of his endowment to transfer to the recipient. The supervisor can punish the dictator and/or transfer to the recipient after learning about the dictator’s decision. We find that transfers by a dictator are highest and stable when the group of three is fixed, no matter whether roles change or not. There is limited support of a leading-by-example effect, that is, only when both role and group composition of subjects are fixed, supervisors give more the more dictators gave, and dictators transfer more in the next period the more supervisors gave in a period. Punishment partially has a disciplining effect on dictators. Finally, we observe that subjects’ actual actions are consistent with their beliefs and expectations.

Suggested Citation

  • Heim, Réka & Huber, Jürgen, 2019. "Leading-by-example and third-party punishment: Experimental evidence," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    • Handle: RePEc:eee:beexfi:v:24:y:2019:i:c:s221463501830176x
    DOI: 10.1016/j.jbef.2019.03.009
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    More about this item

    Keywords

    Dictator game; Peer effects; Leading-by-example; Third party; Punishment;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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