State or Nature? Formal vs. Informal Sanctioning in the Voluntary Provision of Public Goods

Brown Economics Working Paper

49 Pages Posted: 31 Jan 2011

See all articles by Kenju Kamei

Kenju Kamei

Durham University - Department of Economics and Finance

Louis Putterman

Brown University - Department of Economics

Jean-Robert Tyran

University of Vienna; University of Copenhagen - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2011

Abstract

The sanctioning of norm-violating behavior by an effective formal authority is an efficient solution for social dilemmas. It is in the self-interest of voters and is often favorably contrasted with letting citizens take punishment into their own hands. Allowing informal sanctions, by contrast, not only comes with a danger that punishments will be misapplied, but also should have no efficiency benefit under standard assumptions of self-interested agents. We experimentally investigate the relative effectiveness of formal vs. informal sanctions in the voluntary provision of public goods. Unsurprisingly, we find that effective formal sanctions are popular and efficient when they are free to impose. Surprisingly, we find that informal sanctions are often more popular and more efficient when effective formal sanctions entail a modest cost. The reason is that informal sanctions achieve more efficient outcomes than theory predicts, especially when the mechanism is chosen by voting.

Keywords: Sanction, Social Dilemma, Public Goods, Voluntary Contribution Mechanism, Punishment, Experiment

JEL Classification: C92, C91, D03, D71, H41.

Suggested Citation

Kamei, Kenju and Putterman, Louis G. and Tyran, Jean-Robert, State or Nature? Formal vs. Informal Sanctioning in the Voluntary Provision of Public Goods (January 31, 2011). Brown Economics Working Paper, Available at SSRN: https://ssrn.com/abstract=1752266 or http://dx.doi.org/10.2139/ssrn.1752266

Kenju Kamei (Contact Author)

Durham University - Department of Economics and Finance ( email )

Durham, DH1 3HY
United Kingdom

Louis G. Putterman

Brown University - Department of Economics ( email )

Box B
Providence, RI 02912
United States
401-863-3837 (Phone)
401-863-1970 (Fax)

Jean-Robert Tyran

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/jean-robert.tyran/

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+45 353 23 027 (Phone)

HOME PAGE: http://www.econ.ku.dk/tyran/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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