Risky Punishment and Reward in the Prisoner
We conduct a prisoner’s dilemma experiment with a punishment/reward stage, where punishments and rewards are risky. This is compared with a risk free treatment. We find that subjects do not change their behavior in the face of risky outcomes. Additionally, we measure risk attitude and the emotions of subjects. While we find a strong influence of emotions, individual risk aversion has no effect on the decision to punish or reward. This is good news for lab experiments who abstract from risky outcomes. From the perspective of social preferences, our results provide evidence for risk neutral inclusion of other player’s payoffs in the decisionmaker’s utility function.
|Date of creation:||05 Sep 2007|
|Note:||We gratefully acknowledge productive comments and suggestions of Joerg Oechssler, Wendelin Schnedler, and the participants of the Universität Heidelberg departmental seminar. We thank Timo Goeschl for allowing us to run the experiment in his class and Adam Dominiak for research assistance. Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.|
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- van Winden, Frans, 2001. "Emotional Hazard Exemplified by Taxation-Induced Anger," Kyklos, Wiley Blackwell, vol. 54(2-3), pages 491-506.
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- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
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