An Investment Game with Third-Party Intervention
30 Pages Posted: 27 Sep 2007
Date Written: April 16, 2007
Abstract
This paper explores the effect of the possibility of third-party intervention on behavior in a variant of the Berg, Dickhaut, and McCabe (1995) "Investment Game". A third-party's material payoff is not affected by the decisions made by the other participants, but this person may choose to punish a responder who has been overly selfish. The concern over this possibility may serve to discipline potentially-selfish responders. We also explore a treatment in which the third party may also choose to reward a sender who has received a low net payoff as a result of the responder's action. We find a strong and significant effect of third-party punishment, in both punishment regimes, as the amount sent by the first mover is more than 60% higher when there is the possibility of third-party punishment. We also find that responders return a higher proportion of the amount sent to them when there is the possibility of punishment, with this proportion slightly higher when reward is not feasible. Finally, third parties punish less when reward is feasible, but nevertheless spend more on the combination of reward and punishment when these are both permitted than on punishment when this is the only choice for redressing material outcomes.
Keywords: Trust, punishment, third-party intervention, responsibility-alleviation
JEL Classification: A13, B49, C91, D63
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Steffen Huck, Gabriele K. Lünser, ...
-
By Steffen Huck, Gabriele K. Lünser, ...
-
Screening, Competition, and Job Design: Economic Origins of Good Jobs
By Björn Bartling, Ernst Fehr, ...
-
Screening, Competition, and Job Design: Economic Origins of Good Jobs
By Björn Bartling, Ernst Fehr, ...
-
Screening, Competition, and Job Design: Economic Origins of Good Jobs
By Björn Bartling, Ernst Fehr, ...
-
Authority Versus Loyalty: Social Incentives and Modes of Governance
By Samuel Lee and Petra Persson
-
By Steffen Huck, Gabriele K. Lünser, ...
-
By Steffen Huck, Gabriele K. Lünser, ...
-
The Impact of Distributional Preferences on (Experimental) Markets for Expert Services
By Rudolf Kerschbamer, Matthias Sutter, ...