Department of Economics and Business Economics

Cooperation and Norm-Enforcement under Impartial vs. Competitive Sanctions

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The willingness of mere bystanders, or “third parties,” to incur costs to sanction non-cooperators in social dilemma situations has been documented in numerous studies. It is, however, not clear yet how different forms of higher-order punishment affect third party behavior and the level of cooperation. This paper experimentally studies incentives for third parties to enforce contribution norms in public-good games. We compare two treatments where the third party is embedded in different stylized institutions to a baseline treatment where this is not the case. In our treatments, the third party is, first, evaluated by another uninvolved individual ("fourth party"), and second, faces competition by another potential third party punisher. We find that third parties punish free-riding public good players more severely if they have to fear negative payoff consequences for themselves. Importantly, our results point to substantial qualitative differences between the institutional arrangements: When the third party is under scrutiny of a fourth party, punishment is more balanced, but also high compared to the other treatments. By contrast, competition between two third party candidates leads to strategic and partial punishment, generating the most profitable outcomes for public good players.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages32
Publication statusPublished - Oct 2020
SeriesEconomics Working Papers

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