A Comparative Statics Analysis of Punishment in Public-Good Experiments
21 Pages Posted: 24 Jun 2005
Date Written: June 17, 2005
This paper provides a comparative statics analysis of punishment in public-good experiments. We vary systematically the effectiveness of punishment, that is, the factor by which punishment reduces the punished player's income, and we find that contributions to the public good increase monotonically in effectiveness. High effectiveness leads to near complete contribution rates and welfare improvements. Below a certain threshold, however, punishment cannot prevent the decay of cooperation found in the public-good game without punishment. In these cases, the possibility to punish may even worsen welfare. Finally, we show that punishment is a normal and inferior good.
Keywords: Experimental economics, public goods, punishment
JEL Classification: C90
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