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

Author

Listed:
  • Haigner, Stefan
  • Kocher, Martin
  • Sutter, Matthias

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 large and positive effect of endogenous institutional choice on the level of cooperation in comparison to exogenously implemented institutions. This suggests that democratic participation rights enhance cooperation in groups. With endogenous choice, groups typically vote for the reward option, even though punishment is actually more effective in sustaining high levels of cooperation. Our results are evaluated against the predictions of social preference models.

Suggested Citation

  • Haigner, Stefan & Kocher, Martin & Sutter, Matthias, 2006. "Choosing the Stick or the Carrot? Endogenous Institutional Choice in Social Dilemma Situations," CEPR Discussion Papers 5497, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5497
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    References listed on IDEAS

    as
    1. Nikos Nikiforakis & Hans-Theo Normann, 2008. "A comparative statics analysis of punishment in public-good experiments," Experimental Economics, Springer;Economic Science Association, vol. 11(4), pages 358-369, December.
    2. Casari, Marco & Luini, Luigi, 2005. "Group Cooperation Under Alternative Peer Punishment Technologies: An Experiment," Purdue University Economics Working Papers 1176, Purdue University, Department of Economics.
    3. Feld, Lars P & Tyran, Jean-Robert, 2002. "Tax Evasion and Voting: An Experimental Analysis," Kyklos, Wiley Blackwell, vol. 55(2), pages 197-222.
    4. Martin Sefton & Robert Shupp & James M. Walker, 2007. "The Effect Of Rewards And Sanctions In Provision Of Public Goods," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 671-690, October.
    5. Nikos Nikiforakis, 2004. "Punishment and Counter-punishment in Public Goods Games: Can we still govern ourselves?," Experimental 0403001, University Library of Munich, Germany.
    6. Rege, Mari & Telle, Kjetil, 2004. "The impact of social approval and framing on cooperation in public good situations," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1625-1644, July.
    7. Kirchsteiger, Georg & Niederle, Muriel & Potters, Jan, 2005. "Endogenizing market institutions: An experimental approach," European Economic Review, Elsevier, vol. 49(7), pages 1827-1853, October.
    8. Casari, Marco & Plott, Charles R., 2003. "Decentralized management of common property resources: experiments with a centuries-old institution," Journal of Economic Behavior & Organization, Elsevier, vol. 51(2), pages 217-247, June.
    9. 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.
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    More about this item

    Keywords

    endogenous institutional choice; experiment; public goods; punishment; reward; voting;

    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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