Do Non-Strategic Sanctions Obey the Law of Demand? The Demand for Punishment in the Voluntary Contribution Mechanism

Abstract

The prospect of receiving a monetary sanction for free riding has been shown to increase contributions to public goods. We ask whether the impulse to punish is unresponsive to the cost to the punisher, or whether, like other preferences, it interacts with prices to generate a conventional demand curve. We test the price responsiveness of the demand for punishment by randomly varying the cost of reducing the earnings of other group members following laboratory voluntary contribution decisions. In our design, new groups are formed after each interaction and no subject faces any other more than once, so there is no strategic reason to punish. We nonetheless find significant levels of punishment, and we learn that both price and the extent to which the recipient's contribution is below the group mean are significant determinants of the quantity of punishment demanded. Moreover, punishment is mainly directed at free riders even when it costs nothing to the punisher. However, the propensity to punish egregious free riding varies considerably within our subject pool, from non-punishers to aggressive punishers.

Keywords: Public goods, collective action, experiment, punishment, demand

JEL Classification: C91, H41, D71