Punishment and Cooperation in Stochastic Social Dilemmas

37 Pages Posted: 13 Oct 2012

See all articles by Erte Xiao

Erte Xiao

Monash University

Howard Kunreuther

University of Pennsylvania - Wharton Risk Management and Decision Processes Center; National Bureau of Economic Research (NBER)

Date Written: October 2012

Abstract

Previous findings on punishment have focused on environments in which the outcomes are known with certainty. In this paper, we conduct experiments to investigate how punishment affects cooperation in a two-person stochastic prisoner's dilemma environment where each person can decide whether or not to cooperate, and the outcomes of alternative strategies are specified probabilistically under a transparent information condition. In particular, we study two types of punishment mechanisms: 1) an unrestricted punishment mechanism: both persons can punish; and 2) a restricted punishment mechanism: only cooperators can punish non-cooperators. We show that the restricted punishment mechanism is more effective in promoting cooperative behavior than the unrestricted one in a deterministic social dilemma. More importantly, the restricted type is less effective in an environment where the outcomes are stochastic than when they are known with certainty. Our data suggest that one explanation is that non-cooperative behavior is less likely to be punished when there is outcome uncertainty. Our findings provide useful information for designing efficient incentive mechanisms to induce cooperation in a stochastic social dilemma environment.

Suggested Citation

Xiao, Erte and Kunreuther, Howard C., Punishment and Cooperation in Stochastic Social Dilemmas (October 2012). NBER Working Paper No. w18458, Available at SSRN: https://ssrn.com/abstract=2161205

Erte Xiao (Contact Author)

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Howard C. Kunreuther

University of Pennsylvania - Wharton Risk Management and Decision Processes Center ( email )

3819 Chestnut Street
Suite 130
Philadelphia, PA 19104
United States
215-898-4589 (Phone)

National Bureau of Economic Research (NBER)

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