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

  • Sutter, Matthias
  • Haigner, Stefan
  • Kocher, Martin G.

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.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 18193.

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Date of creation: 2010
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Publication status: Published in Review of Economic Studies 4 77(2010): pp. 1540-1566
Handle: RePEc:lmu:muenar:18193
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  1. Casari, Marco & Luini, Luigi, 2006. "Peer Punishment in Teams: Emotional or Strategic Choice?," Purdue University Economics Working Papers 1188, Purdue University, Department of Economics.
  2. Nikos Nikiforakis & Hans-Theo Normann, 2008. "A comparative statics analysis of punishment in public-good experiments," Experimental Economics, Springer, vol. 11(4), pages 358-369, December.
  3. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2003. "Monetary and Nonmonetary Punishment in the Voluntary Contributions Mechanism," American Economic Review, American Economic Association, vol. 93(1), pages 366-380, March.
  4. Fehr, Ernst & Schmidt, Klaus M., 2004. "Fairness and incentives in a multi-task principal-agent model," Munich Reprints in Economics 20657, University of Munich, Department of Economics.
  5. Marco Casari, 2005. "On the Design of Peer Punishment Experiments," Experimental Economics, Springer, vol. 8(2), pages 107-115, June.
  6. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  7. 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.
  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. 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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