Imperfect Public Monitoring with Costly Punishment - An Experimental Study

24 Pages Posted: 14 Nov 2011

See all articles by Attila Ambrus

Attila Ambrus

Duke University - Department of Economics

Ben Greiner

Vienna University of Economics and Business

Date Written: November 13, 2011

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 both contributions and the average net payoffs of subjects. In a more realistic imperfect monitoring environment, we find a U-shaped relationship between the severity of punishment and average net payoffs. Access to a standard punishment technology in this setting significantly decreases net payoffs, even in the long run. Access to a very 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.

Keywords: public good contribution experiments, imperfect monitoring, welfare implications of costly punishment

JEL Classification: C72, C92, H41

Suggested Citation

Ambrus, Attila and Greiner, Ben, Imperfect Public Monitoring with Costly Punishment - An Experimental Study (November 13, 2011). UNSW Australian School of Business Research Paper No. 2011 ECON 10. Available at SSRN: https://ssrn.com/abstract=1959170

Attila Ambrus

Duke University - Department of Economics ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Ben Greiner (Contact Author)

Vienna University of Economics and Business

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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