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Choosing the Carrot or the Stick? Endogenous Institutional Choice in Social Dilemma Situations

  • Matthias Sutter
  • Stefan Haigner
  • Martin G. Kocher

We analyse an experimental public goods game in which group members can endogenously determine whether they want to supplement a standard voluntary contribution mechanism with the possibility of rewarding or punishing other group members. We find a significantly positive effect of endogenous institutional choice on the level of cooperation in comparison to the same exogenously implemented institutions. This suggests that participation rights enhance cooperation in groups. With endogenous choice, groups typically vote for the reward option, although punishment is even more effective in sustaining high levels of cooperation. Our results are evaluated against the predictions of social preference models. Copyright , Wiley-Blackwell.

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File URL: http://hdl.handle.net/10.1111/j.1467-937X.2010.00608.x
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Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 77 (2010)
Issue (Month): 4 ()
Pages: 1540-1566

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Handle: RePEc:oup:restud:v:77:y:2010:i:4:p:1540-1566
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  1. Nikos Nikiforakis & Hans-Theo Normann, 2005. "A Comparative Statics Analysis of Punishment in Public-Good Experiments," Royal Holloway, University of London: Discussion Papers in Economics 05/07, Department of Economics, Royal Holloway University of London, revised Jun 2005.
  2. Masclet, D. & Noussair, C. & Tucker, S. & Villeval, M.C., 2001. "Monetary and Non-monetary Punishment in the Voluntary Contributions Mechanism," Purdue University Economics Working Papers 1141, Purdue University, Department of Economics.
  3. Casari, Marco & Luini, Luigi, 2006. "Peer Punishment in Teams: Emotional or Strategic Choice?," Purdue University Economics Working Papers 1188, Purdue University, Department of Economics.
  4. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  5. Marco Casari & Luigi Luini, 2005. "Group Cooperation Under Alternative Peer Punishment Technologies: An Experiment," Labsi Experimental Economics Laboratory University of Siena 002, University of Siena.
  6. Marco Casari, 2005. "On the Design of Peer Punishment Experiments," Experimental Economics, Springer, vol. 8(2), pages 107-115, June.
  7. Fehr, Ernst & Schmidt, Klaus M., 2004. "Fairness and Incentives in a Multi-Task Principle-Agent Model," CEPR Discussion Papers 4464, C.E.P.R. Discussion Papers.
  8. Nikiforakis, Nikos, 2008. "Punishment and counter-punishment in public good games: Can we really govern ourselves," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 91-112, February.
  9. Stephan Kroll & Todd L. Cherry & Jason F. Shogren, 2007. "Voting, Punishment, And Public Goods," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 557-570, 07.
  10. Carpenter, Jeffrey P., 2007. "The demand for punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 522-542, April.
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