Combining Monetary and Social Sanctions to Promote Cooperation

Abstract

We employ an experimental approach to consider the impact of a combination of formal and informal sanctions on contribution levels for a specific type of public good. We find that when both sanctions are available, contributions and overall welfare are higher than when only one of the two sanctioning systems is available. The availability of an array of sanctions of varying severity appears to enhance welfare. (JEL C92) 1. Coleman (1990) characterizes this situation as the existence of demand for a behavioral norm. See Elster (1989) for a discussion of the origins and benefits of social norms.2. Several economic models have investigated the consequences of social pressure on economic behavior. See, for example, Akerlof (1980) and Lindbeck et al. (1999). Elster (1989 distinguishes between guilt, an internal type of pressure and shame, an external type of social pressure, as forces promoting prosocial behavior. Labor economists, such as Kandel and Lazear (1992) and Barron and Gjerde (1997), have modeled the effect of peer pressure on team output.

Punishment with Uncertain Outcomes in the Prisoner’s Dilemma

“…Initially, the effect on cooperation is small, but the contributions to a public project increase over time in a repeated game. A considerable amount of literature follows this paper and extends the result to nonpecuniary sanctions (Masclet, et al (2003); Noussair and Tucker (2005)) and explores the effectiveness of punishment (Nikiforakis and Normann (2008)) as well as the price of punishment (Anderson andPutterman (2006), Carpenter (2007)). …”

On approval and disapproval: Theory and experiments

“…They report that both types of sanctions were effective in promoting contributions to the public good, although material sanctions were more effective over time. In addition, Noussair and Tucker (2005) show that contributions to the public good are higher when both types of sanctions are present than if just one of the two types is available. Rege and Telle (2004) report that contributions to a one-shot public good game played among strangers are significantly higher when individual contributions are made public at the end of the game, thus facilitating social approval/disapproval -in contrast, Gächter and Fehr (1999) do not observe this phenomenon in a 10-period public good game.…”

The Role of Business Entertainment in Economic Exchanges: A Governance Perspective and Propositions

“…At the personal level, confirming to this norm can make an individual greatly joyful and failing to do so is more likely to result in self-imposed emotional penalties. The members of such a society are more likely to earn respect and good reputation by following the norm of reciprocity, but face peer disapproval and social ostracism by violating this norm (Noussair & Tucker, 2005). Such personal and group penalties represent social sanctions that force economic actors to abide by transaction terms even in the face of material losses.…”

“…By agreeing to attend an entertainment event, the guest accepts the goodwill and 'a portion of the being' from the host, as happens in all gift exchanges (see e.g., Sherry Jr., 1983: 159). If the guest fails to return the goodwill in the accompanied transaction, he/she would incur internal emotional penalties and external group sanctions (Noussair & Tucker, 2005). Indirectly, those social interactions afforded by entertainment events can increase a guest's commitment to the accompanied transaction in fulfilling his/her obligations to the host under the norm of reciprocity (Greenberg, 1980).…”