The supposed irrelevance of historical costs for rational decision making has been the subject of much interest in the economic literature. In this paper we explore whether individual decision making under risk is a¤ected by the cost of information. To do so one must distinguish the e¤ect of cost from self selection by individuals who value information the most. Outside of the laboratory it is A previous version of this paper was circulated under the title "Information at a Cost". y For their useful comments, we would like to thank

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This paper studies experimentally how the endogeneity of sanctioning institutions affects the severity of punishment in social dilemmas. We allow individuals to vote on the introduction of third-party-administered sanctions, and compare situations in which the adoption of this institution is endogenously decided via majority voting to situations in which it is exogenously imposed by the experimenter. Our experimental design addresses the self-selection and signaling effects that arise when subjects can vote on the institutional setting. We find that punishment is significantly higher when the sanctioning institution is exogenous, which can be explained by a difference in the effectiveness of punishment. Subjects respond to punishment more strongly when the sanctioning institution is endogenously chosen. As a result, a given cooperation level can be reached through milder punishment when third-party sanctions are endogenous. However, overall efficiency does not differ across the two settings as the stricter punishment implemented in the exogenous one sustains high cooperation as subjects interact repeatedly.

This article presents the first experiment exploring the impact of debarments -the exclusion of colluding bidders -on collusion in procurement auctions. We find that debarments reduce collusion and bids relative to a market with no sanction. The deterrent effect of debarments increases in the length of the punishment. However, shorter debarments reduce efficiency and increase the bids of non-debarred bidders. This suggests that debarments that are too lenient may trigger tacit collusion among the bidders who remain in the market, thereby facilitating the very behavior they aim to deter.