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

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  • Matthias Sutter
  • Stefan Haigner
  • Martin G. Kocher

Abstract

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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  • Matthias Sutter & Stefan Haigner & Martin G. Kocher, 2010. "Choosing the Carrot or the Stick? Endogenous Institutional Choice in Social Dilemma Situations," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1540-1566.
  • Handle: RePEc:oup:restud:v:77:y:2010:i:4:p:1540-1566
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2010.00608.x
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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