Getting Punishment Right: Do Costly Monitoring or Redistributive Punishment Help?

We introduce new treatments of a voluntary contribution mechanism with opportunities to punish, to see how contributions and punishments change when (a) each dollar lost in punishment must be awarded to another team member and/or when (b) obtaining information on individuals' contributions is a costly choice. Conjectures that tying punishments to rewards might reduce punishment of high contributors (perverse punishment) or increase overall punishing are not completely born out, but innovation (a) nonetheless succeeds in making the net punishment of high contributors much less common because they receive enough rewards to offset punishment. A surprise finding is that innovation (b) also decreases the incidence of misdirected punishment, since high contributors do more monitoring than low ones while low contributors do most of the perverse punishing. Both innovations raise both contributions and earnings relative to the familiar VCM-with-punishment treatment

Self-Organization for Collective Action: An Experimental Study of Voting on Formal, Informal, and No Sanction Regimes

Entrusting the power to punish to a central authority is a hallmark of civilization. We study a collective action dilemma in which self-interest should produce a sub-optimal outcome absent sanctions for non-cooperation. We then test experimentally whether subjects make the theoretically optimal choice of a formal sanction scheme that costs less than the surplus it makes possible, or instead opt for the use of informal sanctions or no sanctions. Most groups adopt formal sanctions when they are of deterrent magnitude and cost a small fraction (10%) of the potential surplus. Contrary to the standard theoretical prediction, however, most groups choose informal sanctions when formal sanctions are more costly (40% of the surplus). Being adopted by voting appears to enhance the efficiency of both informal sanctions and non-deterrent formal sanctions