Punishment and Counter-Punishment in Public Good Games: Can We Still Govern Ourselves?
47 Pages Posted: 2 Aug 2005
Date Written: May 2005
This paper studies how the existence of counter-punishment opportunities affects cooperation and welfare when agents face a social dilemma. Using a public-good game we find that under the threat of counter-punishment cooperators are less willing to punish free-riders. As a result, under both fixed and random matching, the fear of counter-punishment to a large extent offsets the well-documented disciplinary effect of punishment and cooperation breaks down. The costs associated with punishment and counter-punishment episodes on average outweigh any benefits coming from higher cooperation and as a result welfare is lower than in the treatment without punishments where free-riding is predominant.
Keywords: Public goods, counter-punishment, decentralized punishment, freeriding
JEL Classification: C92, D70, H41
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