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Choosing the carrot or the stick? ? Endogenous institutional choice in social dilemma situations

  • Matthias Sutter

    ()

  • Stefan Haigner

    ()

  • Martin Kocher

    ()

We analyze 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 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.

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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2008-07.

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Handle: RePEc:inn:wpaper:2008-07
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  1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 817-869, August.
  2. 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.
  3. 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.
  4. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2003. "Monetary and non Monetary Punishment in the Voluntary Contributions Mechanism," Post-Print halshs-00175251, HAL.
  5. 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.
  6. Marco Casari, 2004. "On the Design of Peer Punishment Experiments," UFAE and IAE Working Papers 615.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  7. 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.
  8. Jeffrey Carpenter, 2002. "The Demand for Punishment," Middlebury College Working Paper Series 0243, Middlebury College, Department of Economics.
  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. Casari, Marco & Luini, Luigi, 2006. "Peer Punishment in Teams: Emotional or Strategic Choice?," Purdue University Economics Working Papers 1188, Purdue University, Department of Economics.
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