Choosing the Stick or the Carrot? Endogenous Institutional Choice in Social Dilemma Situations
51 Pages Posted: 23 May 2006
Date Written: February 2006
We analyse an experimental public goods game in which group members can endogenously determine whether they want to supplement a standard voluntary contribution mechanism with the possibility of rewarding or punishing other group members. We find a large and positive effect of endogenous institutional choice on the level of cooperation in comparison to exogenously implemented institutions. This suggests that democratic participation rights enhance cooperation in groups. With endogenous choice, groups typically vote for the reward option, even though punishment is actually more effective in sustaining high levels of cooperation. Our results are evaluated against the predictions of social preference models.
Keywords: Public goods, punishment, reward, endogenous institutional choice, voting, experiment
JEL Classification: C72, C91, C92
Suggested Citation: Suggested Citation