Do People Accurately Anticipate Sanctions?
44 Pages Posted: 6 Jul 2013
Date Written: January 1, 2011
We consider an experiment with four different games. In each, a first mover A can choose between two allocations of payoffs for her and a co-player B, who has then the option to either punish or reward A. Two treatments are examined: One with monetary sanctions (punishment/reward) and another one with non-monetary sanctions (i.e., approval and disapproval). In both, we elicit first movers’ expectations to study whether they accurately predict the average sanction at each allocation. Our results in both treatments indicate that most subjects anticipate correctly the sign of the average sanction, although the strength of the sanction is predicted with a substantial error. Yet this error exhibits no systematic bias, except in those allocations where first movers happen to be rewarded, as they tend to underestimate the reward. In this line, we find symptomatic evidence that "sticks" are better anticipated than "carrots", thus suggesting a relative advantage of punishment in providing incentives.
Keywords: Approval, disapproval, expectations, monetary sanctions, non-monetary sanctions, punishment, rewards, social norms
JEL Classification: C70, C91, D63, D74, Z13
Suggested Citation: Suggested Citation