Mixing the Carrots with the Sticks: Third Party Punishment and Reward

26 Pages Posted: 8 Jan 2014

See all articles by Nikos Nikiforakis

Nikos Nikiforakis

New York University (NYU) - New York University Abu Dhabi

Helen Mitchell

Government of the Commonwealth of Australia - Department of Foreign Affairs and Trade

Date Written: January 7, 2014

Abstract

While the opportunity to punish selfish and reward generous behavior coexist in many instances in daily life, in most laboratory studies, the demand for punishment and reward are studied separately from one another. This paper presents the results from an experiment measuring the demand for reward and punishment by 'unaffected' third parties, separately and jointly. We find that the demand for costly punishment is substantially lower when individuals are also given the ability to reward. Similarly, the demand for costly reward is lower when individuals can also punish. The evidence indicates the reason for this is that costly punishment and reward are not only used to alter the material payoff of others as assumed by recent economic models, but also as a signal of disapproval and approval of others’ actions, respectively. When the opportunity exists, subjects often choose to withhold reward as a form of costless punishment, and to withhold punishment as a form of costless reward. We conclude that restricting the available options to punishing (rewarding) only, may lead to an increase in the demand for costly punishment (reward).

Keywords: punishment, reward, social norms, norm enforcement, third party

JEL Classification: C91, D03, D63, H41

Suggested Citation

Nikiforakis, Nikos and Mitchell, Helen, Mixing the Carrots with the Sticks: Third Party Punishment and Reward (January 7, 2014). Available at SSRN: https://ssrn.com/abstract=2375713 or http://dx.doi.org/10.2139/ssrn.2375713

Nikos Nikiforakis (Contact Author)

New York University (NYU) - New York University Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

HOME PAGE: http://https://sites.google.com/site/nnikiforakis/home

Helen Mitchell

Government of the Commonwealth of Australia - Department of Foreign Affairs and Trade ( email )

Australia

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