Third-Party Punishment: Retribution or Deterrence?

44 Pages Posted: 16 Apr 2014 Last revised: 22 Sep 2014

See all articles by Fangfang Tan

Fangfang Tan

Max Planck Institute for Tax Law and Public Finance

Erte Xiao

Monash University

Date Written: April 16, 2014

Abstract

We conduct an experiment to examine the role of retribution and deterrence in motivating third party punishment. In particular, we consider how the role of these two motives may differ according to whether a third party is a group or an individual. In a one-shot prisoner’s dilemma game with third party punishment, we find groups punish more when the penalty embeds deterrence than when it can only be retributive. In contrast, individual third parties’ punishment decisions do not vary on whether the punishment has any deterrent effect. In general, third party groups are less likely to impose punishment than individuals even though the punishment is costless for third parties.

Keywords: third-party punishment, group decision making, retribution, deterrence, social dilemmas, experiment

JEL Classification: C72, C92, D63, D70

Suggested Citation

Tan, Fangfang and Xiao, Erte, Third-Party Punishment: Retribution or Deterrence? (April 16, 2014). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2014-05. Available at SSRN: https://ssrn.com/abstract=2425522 or http://dx.doi.org/10.2139/ssrn.2425522

Fangfang Tan (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/public_economics/public_economics_people/fangfang_tan.cfm

Erte Xiao

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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