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Mixing the carrots with the sticks: third party punishment and reward

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  • Nikos Nikiforakis

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  • Helen Mitchell

Abstract

While the opportunity to punish selfish and reward generous behavior coexist in many instances in daily life, in most laboratory studies, the demand for punishment and reward are studied separately from one another. This paper presents the results from an experiment measuring the demand for reward and punishment by ‘unaffected’ third parties, separately and jointly. We find that the demand for costly punishment is substantially lower when individuals are also given the ability to reward. Similarly, the demand for costly reward is lower when individuals can also punish. The evidence indicates the reason for this is that costly punishment and reward are not only used to alter the material payoff of others as assumed by recent economic models, but also as a signal of disapproval and approval of others’ actions, respectively. When the opportunity exists, subjects often choose to withhold reward as a form of costless punishment, and to withhold punishment as a form of costless reward. We conclude that restricting the available options to punishing (rewarding) only, may lead to an increase in the demand for costly punishment (reward). Copyright Economic Science Association 2014

Suggested Citation

  • Nikos Nikiforakis & Helen Mitchell, 2014. "Mixing the carrots with the sticks: third party punishment and reward," Experimental Economics, Springer;Economic Science Association, vol. 17(1), pages 1-23, March.
  • Handle: RePEc:kap:expeco:v:17:y:2014:i:1:p:1-23
    DOI: 10.1007/s10683-013-9354-z
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    Cited by:

    1. Dirk Engelmann & Nikos Nikiforakis, 2015. "In the long-run we are all dead: on the benefits of peer punishment in rich environments," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(3), pages 561-577, October.
    2. Daniele Nosenzo & Theo Offerman & Martin Sefton & Ailko van der Veen, 2016. "Discretionary Sanctions and Rewards in the Repeated Inspection Game," Management Science, INFORMS, vol. 62(2), pages 502-517, February.
    3. Kriss, Peter H. & Weber, Roberto A. & Xiao, Erte, 2016. "Turning a blind eye, but not the other cheek: On the robustness of costly punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 159-177.
    4. Bartling, Björn & Engl, Florian & Weber, Roberto A., 2014. "Does willful ignorance deflect punishment? – An experimental study," European Economic Review, Elsevier, vol. 70(C), pages 512-524.
    5. Yoshio Kamijo, 2014. "A theory of sanctions: Objectives, degree of heterogeneity, and growth potential matter for optimal use of carrot or stick," Working Papers SDES-2014-13, Kochi University of Technology, School of Economics and Management, revised Oct 2014.
    6. Fehr, Dietmar & Sutter, Matthias, 2016. "Gossip and the Efficiency of Interactions," IZA Discussion Papers 9704, Institute for the Study of Labor (IZA).
    7. Bicskei, Marianna & Lankau, Matthias & Bizer, Kilian, 2016. "Negative reciprocity and its relation to anger-like emotions in identity-homogeneous and -heterogeneous groups," Journal of Economic Psychology, Elsevier, vol. 54(C), pages 17-34.
    8. Jillian Jordan & Katherine McAuliffe & David Rand, 2016. "The effects of endowment size and strategy method on third party punishment," Experimental Economics, Springer;Economic Science Association, vol. 19(4), pages 741-763, December.
    9. Isabel Marcin & Pedro Robalo & Franziska Tausch, 2016. "Institutional Endogeneity and Third-party Punishment in Social Dilemmas," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2016_06, Max Planck Institute for Research on Collective Goods.
    10. Kakizawa, Hisanobu, 2017. "The value of punishment of free riders: A case study on the receiving fee system of the Japanese public broadcasting organization," 14th ITS Asia-Pacific Regional Conference, Kyoto 2017: Mapping ICT into Transformation for the Next Information Society 168496, International Telecommunications Society (ITS).

    More about this item

    Keywords

    Punishment; Reward; Social norms; Norm enforcement; Third party; C91; D03; D63; H41;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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