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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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