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The Effect of Digitalization on Penalty Payments: An Experimental Investigation

30 Pages Posted: 11 Sep 2015  

Siyu Wang

R&D Analytics, Ford Motor Company; George Mason University

Xiangdong Qin

Shanghai Jiao Tong University (SJTU)

Multiple version iconThere are 2 versions of this paper

Date Written: August 24, 2015

Abstract

The method of payment for penalties such as traffic tickets or library fines has become increasingly digitalized, with possible implications on the future effectiveness of deterring opportunistic behavior. Several recent experimental studies have suggested that people treat digital cash equivalents differently from physical cash. This paper is the first to compare the efficacy of punishment between cash and electronic cash-exchangeable penalties in a laboratory setting. Our results indicate that while both forms of punishment increase cooperation, cash penalties are significantly more effective. Interestingly, this difference gradually disappears over time.

Keywords: Experiment, Punishment, Endowment effect, Tangibility effect

JEL Classification: C91 ,D03, D64

Suggested Citation

Wang, Siyu and Qin, Xiangdong, The Effect of Digitalization on Penalty Payments: An Experimental Investigation (August 24, 2015). Available at SSRN: https://ssrn.com/abstract=2650177 or http://dx.doi.org/10.2139/ssrn.2650177

Siyu Wang (Contact Author)

R&D Analytics, Ford Motor Company ( email )

15031 Commerce Dr S
Dearborn, MI 48108
United States

George Mason University ( email )

4400 University Drive
MSN 1B2
Fairfax, VA 22030
United States

Xiangdong Qin

Shanghai Jiao Tong University (SJTU)

KoGuan Law School
Shanghai 200030, Shanghai 200052
China

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