A Fine Rule from a Brutish World? An Experiment on Endogenous Punishment Institution and Trust

Quaderni - Working Paper DSE N° 1031

44 Pages Posted: 30 Sep 2015

See all articles by Huojun Sun

Huojun Sun

University of Bologna

Maria Bigoni

University of Bologna - Department of Economics; IZA Institute of Labor Economics

Date Written: September 28, 2015

Abstract

By means of a laboratory experiment, we study the impact of the endogenous adoption of a collective punishment mechanism within a one-shot binary trust game. The experiment comprises three games. In the first one, the only equilibrium strategy is not to trust, and not to reciprocate. In the second we exogenously introduce a sanctioning rule that imposes on untrustworthy second-movers a penalty proportional to the number of those who reciprocate trust.

This generates a second equilibrium where everybody trusts and reciprocates. In the third game, the collective punishment mechanism is adopted through majority-voting. In line with the theory, we find that the exogenous introduction of the punishment mechanism significantly increases trustworthiness, and to a lesser extent also trust. However, in the third game the majority of subjects vote against it: subjects seem to be unable to endogenously adopt an institution which, when exogenously imposed, proves to be efficiency enhancing.

Keywords: Coordination, Majority Voting, Social Sanctions, Trust Game

JEL Classification: C72, C92, D72

Suggested Citation

Sun, Huojun and Bigoni, Maria, A Fine Rule from a Brutish World? An Experiment on Endogenous Punishment Institution and Trust (September 28, 2015). Quaderni - Working Paper DSE N° 1031. Available at SSRN: https://ssrn.com/abstract=2666479 or http://dx.doi.org/10.2139/ssrn.2666479

Huojun Sun (Contact Author)

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

Maria Bigoni

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, Bologna 40126
Italy
+390512098134 (Phone)

HOME PAGE: http://https://www.unibo.it/sitoweb/maria.bigoni/en

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
35
Abstract Views
309
PlumX Metrics