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Mixing the Carrots with the Sticks: Are Punishment and Reward Substitutes

Author

Listed:
  • Helen Mitchell
  • Nikos Nikiforakis

Abstract

This paper presents evidence that the demand for costly norm enforcement can be affected by the availability of the means for enforcing the norm. Participants in a laboratory experiment can reward or punish to enforce a distribution norm. Controlling for the extent of norm violation, we find that demand for costly punishment is lower when participants also have the opportunity to reward norm adherence. Similarly, demand for costly reward is lower when participants can punish norm violations, controlling for the extent of norm adherence. The reason is that participants use reward and punishment to signal their approval and disapproval. The availability of reward opportunities allows them to signal their disapproval by withholding reward. Similarly, the availability of punishment opportunities allows them to signal their approval by withholding punishment. This suggests that individuals consider reward and punishment to be substitutes. The resultant reduction in costly enforcement does not affect adherence to the norm, but has a significant impact on earnings in the experiment.

Suggested Citation

  • Helen Mitchell & Nikos Nikiforakis, 2011. "Mixing the Carrots with the Sticks: Are Punishment and Reward Substitutes," Department of Economics - Working Papers Series 1119, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:1119
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    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0004/784255/1119.pdf
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    More about this item

    Keywords

    punishment; reward; social norms; norm enforcement; third party;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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