When Punishment Fails: Research on Sanctions, Intentions and Non-Cooperation

48 Pages Posted: 30 Aug 2005

See all articles by Daniel Houser

Daniel Houser

George Mason University - Department of Economics; Interdisciplinary Center for Economic Science; George Mason University - Mercatus Center

Erte Xiao

Monash University

Kevin A. McCabe

George Mason University - Department of Economics

Vernon L. Smith

Chapman University - Economic Science Institute; Chapman University School of Law

Date Written: June 2005

Abstract

People can become less cooperative when threatened with sanctions, and previous research has pointed to both intentions and incentives as sources of this effect. This paper reports data from a novel experiment aimed at determining the relative importance of intentions and incentives in producing non-cooperative behavior in a personal exchange environment. Subjects play a one-shot investment game in pairs. Investors send an amount to trustees and request a return on this investment and, in some treatments, are given the option to threaten sanctions to enforce this return request. The decisions of trustees who face credible threats intentionally imposed (or not) by their investors are compared to the decisions of trustees who face credible threats randomly imposed (or not) by nature. When not threatened, trustees typically decide to return a positive amount that is less than the investor requested. When threatened with sanctions this decision becomes least common. In particular, under severe sanction threats most trustees return the desired amount, while under weak threats the most common decision is to return nothing. These results do not depend on whether trustees are threatened intentionally by their investors or randomly by nature. We suggest that credible sanction threats generate a "cognitive shift" that crowd-out norm-based social behaviors and increase the likelihood of income-maximizing decisions.

Keywords: experiment, intentions, sanctions, trust, cooperation

JEL Classification: C91, C92, C71

Suggested Citation

Houser, Daniel and Xiao, Erte and McCabe, Kevin A. and Smith, Vernon L., When Punishment Fails: Research on Sanctions, Intentions and Non-Cooperation (June 2005). Available at SSRN: https://ssrn.com/abstract=788204 or http://dx.doi.org/10.2139/ssrn.788204

Daniel Houser

George Mason University - Department of Economics ( email )

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George Mason University - Mercatus Center ( email )

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Erte Xiao (Contact Author)

Monash University ( email )

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Clayton, Victoria 3800
Australia

Kevin A. McCabe

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

Vernon L. Smith

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States
714-628-2830 (Phone)

Chapman University School of Law ( email )

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