Comparing Consequences of Carrots and Sticks on Cooperation in Repeated Public Good Games

Abstract

Many sociologists and economists have maintained that costly sanctions indeed are able to create and sustain cooperation, but under which conditions carrots or sticks are more successful in this respect still an unsettled issue. Dari-Mattiacci and De Geest (2009) recently clarify that the multiplication effect related to sticks is a plausible theoretical explanation for the superiority of sticks. However, there are also more behavioral arguments from which one could maintain that carrots might work better than sticks, for example, because they do not undermine the cohesion of the group as sticks might do. This experimental study investigates whether in a simple experimental setting sticks and carrots differ in their effectiveness in maintaining cooperation. Our results show that while carrots do increase cooperation, sticks turn out to be more effective in our experiment. In addition, we do not find that the group cohesion becomes stronger in the condition with carrots although giving rewards produces positive feelings towards the group.

Keywords: Public Good Game, cooperation, sanctions, experiments

JEL Classification: C92