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On the fragility of third-party punishment: The context effect of a dominated risky investment option

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  • Im, Changkuk
  • Lee, Jinkwon

Abstract

Experimental studies regularly show that third-party punishment (TPP) substantially exists in various settings. This study further investigates the robustness of TPP under an environment where context effects are involved. In our experiment, we offer a third party an additional but unattractive risky investment option. We find that, when the dominated investment option irrelevant to prosocial behavior is available, the demand for punishment decreases, whereas the demand for investment increases. These findings support our hypotheses that the seemingly unrelated and dominated investment option may work as a compromise and suggest the fragility of TPP in this setting.

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  • Im, Changkuk & Lee, Jinkwon, 2022. "On the fragility of third-party punishment: The context effect of a dominated risky investment option," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 98(C).
    • Handle: RePEc:eee:soceco:v:98:y:2022:i:c:s2214804322000477
    DOI: 10.1016/j.socec.2022.101872
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    More about this item

    Keywords

    Third-party punishment; Dominated risky investment; Context effect; Compromise effect; Decoy effect; Neuroeconomics;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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