How Large Should the 'Bullet' Be? Dissecting the Role of Unilateral and Tie Punishment in the Provision of Public Goods

48 Pages Posted: 31 Jul 2017

See all articles by Jia Liu

Jia Liu

University of Newcastle

Yohanes E. Riyanto

Nanyang Technological University (NTU) - Division of Economics

Ruike Zhang

Nanyang Technological University (NTU)

Date Written: July 20, 2017

Abstract

This paper evaluates the role of centralized punishment in boosting contribution to the provision of public goods. To avoid the race to the bottom in the provision of public goods, this centralized punishment mechanism relies on the use of the unilateral and tie punishment imposed on the lowest contributor(s). In this paper, we aim to examine how severe this unilateral and tie punishment should be to achieve the full-contribution equilibrium. Specifically, we are interested in investigating the size of the “bullets” that the “hired gun” should carry. We theoretically derive a range of punishment mechanisms which would lead to full contribution and which are also experimentally tested. Our experimental results generally substantiate the theoretical prediction except for the more lenient punishment parameters. This discrepancy is successfully explained by individual evolutionary learning.

Keywords: Public Goods Provision, Centralized Punishment Mechanism, Unilateral Punishment, Tie Punishment, Individual Evolutionary Learning

JEL Classification: C63; C72; C92; D7; D83; H41

Suggested Citation

Liu, Jia and Riyanto, Yohanes E. and Zhang, Ruike, How Large Should the 'Bullet' Be? Dissecting the Role of Unilateral and Tie Punishment in the Provision of Public Goods (July 20, 2017). Available at SSRN: https://ssrn.com/abstract=3009396 or http://dx.doi.org/10.2139/ssrn.3009396

Jia Liu (Contact Author)

University of Newcastle ( email )

5 Barrack Road
NEWCASTLE UPON TYNE, NE1 4SE
United Kingdom

Yohanes E. Riyanto

Nanyang Technological University (NTU) - Division of Economics ( email )

HSS 04-53, 14 Nanyang Drive
Singapore, 639798
Singapore

Ruike Zhang

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

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