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Punishment and Reward Institutions with Harmed Minorities

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  • Sagi Dekel

    (BGU)

  • Sven Fischer

    (Max Planck Institute of Economics, Germany)

  • Ro’i Zultan

    (BGU)

Abstract

Potential Pareto Public Goods create an aggregate benefit to society while harming some members of the community. As the overall benefit outweighs the harm incurred, provision may lead to Pareto improvement if the gains from cooperation are used to compensate the harmed parties. Such situations are ubiquitous, e.g., in not-in-my-backyard (NIMBY) problems. We study experimentally voluntary contributions to Potential Pareto Public Goods, in which provision is efficient but harms a minority in the group. We test the effects of punishment and reward institutions, with and without communication. We find that contributions to Potential Pareto Public Goods are not viewed as unequivocally socially desirable and do not increase with communication or punishment. With the reward institution, communication facilitates compensation, undoing the harm imposed on the minority player by majority contributions. Consequently, contributions are no longer viewed as socially undesirable, and majority contributions increase. Taken together, our results establish that perceptions and behavior in voluntary contributions to Potential Pareto Public Goods are dramatically different than with universal public goods that benefit all members of the community. We suggest that the underlying mechanism is team reasoning: individuals consider what is good for the group, and play their part in achieving that goal.
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  • Sagi Dekel & Sven Fischer & Ro’i Zultan, 2014. "Punishment and Reward Institutions with Harmed Minorities," Working Papers 1405, Ben-Gurion University of the Negev, Department of Economics.
    • Handle: RePEc:bgu:wpaper:1405
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    Cited by:

    1. Gangadharan, Lata & Nikiforakis, Nikos & Villeval, Marie Claire, 2015. "Equality Concerns and the Limits of Self-Governance in Heterogeneous Populations," IZA Discussion Papers 9384, Institute of Labor Economics (IZA).
    2. Masaki Aoyagi & Naoko Nishimura & Yoshitaka Okano, 2022. "Voluntary redistribution mechanism in asymmetric coordination games," Experimental Economics, Springer;Economic Science Association, vol. 25(2), pages 444-482, April.
    3. Boris Leeuwen & Abhijit Ramalingam & David Rojo Arjona & Arthur Schram, 2019. "Centrality and cooperation in networks," Experimental Economics, Springer;Economic Science Association, vol. 22(1), pages 178-196, March.
    4. Abhijit Ramalingam & Brock V. Stoddard, 2020. "Old habits die hard: The experience of inequality and persistence of low cooperation," Working Papers 20-07, Department of Economics, Appalachian State University.
    5. Gangadharan, Lata & Nikiforakis, Nikos & Villeval, Marie Claire, 2017. "Normative conflict and the limits of self-governance in heterogeneous populations," European Economic Review, Elsevier, vol. 100(C), pages 143-156.
    6. Abhijit Ramalingam & Brock V. Stoddard, 2021. "Does reducing inequality increase cooperation?​," GRU Working Paper Series GRU_2021_022, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    7. Louis-Gaëtan Giraudet & Céline Guivarch, 2018. "Asymmetric impacts and over-provision of public goods," CIRED Working Papers hal-01960318, HAL.
    8. R. Mark Isaac & Douglas A. Norton & Svetlana Pevnitskaya, 2019. "A new experimental mechanism to investigate polarized demands for public goods: the effects of censoring," Experimental Economics, Springer;Economic Science Association, vol. 22(3), pages 585-609, September.
    9. Jie Chen, 2022. "Carrots and sticks: new evidence in public goods games with heterogeneous groups," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(4), pages 1139-1169, October.
    10. Ferraz, Eduardo & Mantilla, César, 2023. "A mechanism for the efficient provision of Potential Pareto public goods," Journal of Public Economics, Elsevier, vol. 225(C).
    11. Koch, Christian & Nikiforakis, Nikos & Noussair, Charles N., 2021. "Covenants before the swords: The limits to efficient cooperation in heterogeneous groups," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 307-321.

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    More about this item

    Keywords

    public goods; punishment; reward; externalities.;
    All these keywords.

    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
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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