The Effects of Punishment in Dynamic Public-Good Games

53 Pages Posted: 15 Apr 2010  

Özgür Gürerk

RWTH Aachen University - School of Economics and Business Administration

Bettina Rockenbach

University of Cologne

Irenaeus Wolff

University of Konstanz - TWI; CEREB

Date Written: March 15, 2010

Abstract

Considerable experimental evidence shows that although costly peer-punishment enhances cooperation in repeated public-good games, heavy punishment in early rounds leads to average period payoffs below the non-cooperative equilibrium benchmark. In an environment where past payoffs determine present contribution capabilities, this could be devastating. Groups could fall prey to a poverty trap or, to avoid this, abstain from punishment altogether. We show that neither is the case generally. By continuously contributing larger fractions of their wealth, groups with punishment possibilities exhibit increasing wealth increments, while increments fall when punishment possibilities are absent. Nonetheless, single groups do succumb to the above-mentioned hazards.

Keywords: Public Good, Dynamic Game, Punishment, Endowment Endogeneity, Poverty-Trap, Experiment

JEL Classification: C73, C91, H41

Suggested Citation

Gürerk, Özgür and Rockenbach, Bettina and Wolff, Irenaeus, The Effects of Punishment in Dynamic Public-Good Games (March 15, 2010). Available at SSRN: https://ssrn.com/abstract=1589362 or http://dx.doi.org/10.2139/ssrn.1589362

Özgür Gürerk

RWTH Aachen University - School of Economics and Business Administration ( email )

Aachen
Germany
+492418096702 (Phone)
+4924180696702 (Fax)

HOME PAGE: http://www.expecon.rwth-aachen.de

Bettina Rockenbach

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany
++49 470 8664 (Phone)
++49 470 8668 (Fax)

Irenaeus Wolff (Contact Author)

University of Konstanz - TWI ( email )

Fach D-144
Universitätsstraße 10
Konstanz, D-78457
Germany

CEREB ( email )

Internationales Buro
Nordhaeuser Str. 63
D - 99089 Erfurt
Germany

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