Imperfect Public Monitoring with Costly Punishment: An Experimental Study

Ambrus, Attila; Greiner, Ben

doi:10.1257/aer.102.7.3317

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American Economic Review: Vol. 102 No. 7 (December 2012)

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Imperfect Public Monitoring with Costly Punishment: An Experimental Study

Article Citation

Ambrus, Attila, and Ben Greiner. 2012. "Imperfect Public Monitoring with Costly Punishment: An Experimental Study." American Economic Review, 102(7): 3317-32.

DOI: 10.1257/aer.102.7.3317

Abstract

This paper experimentally investigates the effects of a costly punishment option on cooperation and social welfare in long, finitely repeated public good contribution games. In a perfect monitoring environment, increasing the severity of the potential punishment monotonically increases average net payoffs. In a more realistic imperfect monitoring environment, we find a U-shaped relationship. Access to a standard punishment technology in this setting significantly decreases net payoffs, even in the long run. Access to a severe punishment technology leads to roughly the same payoffs as with no punishment option, as the benefits of increased cooperation offset the social costs of punishing. (JEL C92, H41, K42)

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Authors

Ambrus, Attila (Duke U)
Greiner, Ben (U New South Wales)

JEL Classifications

C92: Design of Experiments: Laboratory, Group Behavior
H41: Public Goods
K42: Illegal Behavior and the Enforcement of Law