IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v123y2016icp19-30.html
   My bibliography  Save this article

Peer discipline and incentives within groups

Author

Listed:
  • Levine, David K.
  • Modica, Salvatore

Abstract

We investigate how a collusive group can sustain non-Nash actions by enforcing internal discipline through costly peer punishment. We give a simple and tractable characterization of schemes that minimize discipline costs while preserving incentive compatibility. We apply the model to a public goods contribution problem. We find that if the per-capita benefit from the public good is low, then regardless of whether peer discipline is feasible or not only small groups will contribute to the good. If the public good benefit is significant but peer discipline is infeasible it remains the case that only small groups contribute. On the other hand, if the public good benefit is significant but peer discipline is feasible then full contribution takes place regardless of group size. We reconcile this result with Olson's idea that small groups are more effective by considering the case where the per-capita benefit of the public good varies with group size.

Suggested Citation

  • Levine, David K. & Modica, Salvatore, 2016. "Peer discipline and incentives within groups," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 19-30.
  • Handle: RePEc:eee:jeborg:v:123:y:2016:i:c:p:19-30
    DOI: 10.1016/j.jebo.2015.12.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268115003303
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Vega-Redondo, Fernando, 2006. "Building up social capital in a changing world," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 2305-2338, November.
    2. Glenn Ellison, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 567-588.
    3. repec:cup:apsrev:v:95:y:2001:i:03:p:663-672_00 is not listed on IDEAS
    4. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
    5. David K Levine & Andrea Mattozzi, 2016. "Voter Participation with Collusive Parties," Levine's Working Paper Archive 786969000000001234, David K. Levine.
    6. Daron Acemoglu & Alexander Wolitzky, 2015. "Sustaining Cooperation: Community Enforcement vs. Specialized Enforcement," Levine's Bibliography 786969000000001179, UCLA Department of Economics.
    7. Edoardo Di Porto & Nicola Persico & Nicolas Sahuguet, 2013. "Decentralized Deterrence, with an Application to Labor Tax Auditing," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 35-62, February.
    8. repec:wsi:wschap:9789812818478_0012 is not listed on IDEAS
    9. Takahashi, Satoru, 2010. "Community enforcement when players observe partners' past play," Journal of Economic Theory, Elsevier, vol. 145(1), pages 42-62, January.
    10. Kim C. Border & Joel Sobel, 1987. "Samurai Accountant: A Theory of Auditing and Plunder," Review of Economic Studies, Oxford University Press, vol. 54(4), pages 525-540.
    11. Laffont, J.-J., 1999. "Political Economy, Information and Incentives," Papers 99.516, Toulouse - GREMAQ.
    12. Laffont, Jean-Jacques, 1999. "Political economy, information and incentives1," European Economic Review, Elsevier, vol. 43(4-6), pages 649-669, April.
    13. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-180, January.
    14. Demougin, Dominique & Fluet, Claude, 2001. "Monitoring versus incentives," European Economic Review, Elsevier, vol. 45(9), pages 1741-1764, October.
    15. Drew Fudenberg & David Levine & Eric Maskin, 2008. "The Folk Theorem With Imperfect Public Information," World Scientific Book Chapters,in: A Long-Run Collaboration On Long-Run Games, chapter 12, pages 231-273 World Scientific Publishing Co. Pte. Ltd..
    16. Ben-Porath, Elchanan & Kahneman, Michael, 2003. "Communication in repeated games with costly monitoring," Games and Economic Behavior, Elsevier, vol. 44(2), pages 227-250, August.
    17. Irina Slinko & Ekaterina Zhuravskaya & Evgeny Yakovlev, 2005. "Laws for Sale: Evidence from Russia," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 284-318.
    18. Pecorino, Paul, 1999. "The effect of group size on public good provision in a repeated game setting," Journal of Public Economics, Elsevier, vol. 72(1), pages 121-134, April.
    19. Rohan Dutta & David K Levine & Salvatore Modica, 2014. "Collusion, Randomization and Leadership in Groups," Levine's Working Paper Archive 786969000000000982, David K. Levine.
    20. Takuo Sugaya, 2011. "Folk Theorem in Repeated Games with Private Monitoring," Working Papers 1303, Princeton University, Department of Economics, Econometric Research Program..
    21. repec:cup:apsrev:v:86:y:1992:i:02:p:404-417_08 is not listed on IDEAS
    22. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June.
    23. Alberto Ades & Rafael Di Tella, 1997. "The New Economics of Corruption: a Survey and Some New Results," Political Studies, Political Studies Association, vol. 45(3), pages 496-515, August.
    24. repec:cup:apsrev:v:79:y:1985:i:01:p:62-78_22 is not listed on IDEAS
    25. David Rahman, 2012. "But Who Will Monitor the Monitor?," American Economic Review, American Economic Association, vol. 102(6), pages 2767-2797, October.
    26. Alexander Wolitzky, 2013. "Cooperation with Network Monitoring," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 395-427.
    27. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
    28. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    29. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dutta, Rohan & Levine, David Knudsen & Modica, Salvatore, 2018. "Collusion constrained equilibrium," Theoretical Economics, Econometric Society, vol. 13(1), January.
    2. repec:eee:poleco:v:49:y:2017:i:c:p:71-83 is not listed on IDEAS
    3. David K Levine & Andrea Mattozzi, 2016. "Voter Participation with Collusive Parties," Levine's Working Paper Archive 786969000000001234, David K. Levine.
    4. Levine, David K. & Modica, Salvatore, 2017. "Size, fungibility, and the strength of lobbying organizations," European Journal of Political Economy, Elsevier, vol. 49(C), pages 71-83.
    5. repec:eee:deveco:v:128:y:2017:i:c:p:49-64 is not listed on IDEAS
    6. Gani Aldashev & Giorgio Zanarone, 2014. "Endogenous Enforcement Institutions," Working Papers 1403, University of Namur, Department of Economics.
    7. David K Levine & Andrea Mattozzi, 2018. "Voter Turnout with Peer Punishment," Levine's Bibliography 786969000000001500, UCLA Department of Economics.

    More about this item

    Keywords

    Group incentives; Peer discipline; Organization; Group;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:123:y:2016:i:c:p:19-30. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jebo .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.