Hostname: page-component-7b9c58cd5d-bslzr Total loading time: 0.001 Render date: 2025-03-15T22:21:38.918Z Has data issue: false hasContentIssue false
  • English
  • Français

Mixing the carrots with the sticks: third party punishment and reward

Published online by Cambridge University Press:  14 March 2025

Nikos Nikiforakis  and
Helen Mitchell
Nikos Nikiforakis*
Affiliation:
GATE, CNRS, Lyon, France Max-Planck Institute for Research on Collective Goods, Bonn, Germany Department of Economics, The University of Melbourne, Parkville, Australia
Helen Mitchell
Affiliation:
Department of Foreign Affairs and Trade, Australian Government, Barton, Australia
*
[email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

While the opportunity to punish selfish and reward generous behavior coexist in many instances in daily life, in most laboratory studies, the demand for punishment and reward are studied separately from one another. This paper presents the results from an experiment measuring the demand for reward and punishment by ‘unaffected’ third parties, separately and jointly. We find that the demand for costly punishment is substantially lower when individuals are also given the ability to reward. Similarly, the demand for costly reward is lower when individuals can also punish. The evidence indicates the reason for this is that costly punishment and reward are not only used to alter the material payoff of others as assumed by recent economic models, but also as a signal of disapproval and approval of others’ actions, respectively. When the opportunity exists, subjects often choose to withhold reward as a form of costless punishment, and to withhold punishment as a form of costless reward. We conclude that restricting the available options to punishing (rewarding) only, may lead to an increase in the demand for costly punishment (reward).

Keywords

PunishmentRewardSocial normsNorm enforcementThird party

JEL classification

D63: Equity, Justice, Inequality, and Other Normative Criteria and Measurement H41: Public Goods C91: Laboratory, Individual Behavior
Type
Manuscript
Information
Experimental Economics , Volume 17 , Issue 1 , March 2014 , pp. 1 - 23
Copyright
Copyright © 2013 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We would like to thank the Co-Editor (Jacob Goeree), two anonymous referees, Aurelie Dariel, Peter Duersch, Simon Loertscher, Tom Wilkening, participants at the Asia-Pacific meetings of the Economic Science Association in Melbourne (2010), the 5th Australian-New Zealand Workshop in Experimental Economics, and seminar participants at Monash University, the University of Innsbruck, and the University of Melbourne for helpful comments and discussions. The results from the ‘first wave’ of the experiments formed the basis for Helen’s Honors thesis at the University of Melbourne. The authors acknowledge funding from the Department of Economics, and the Faculty of Business and Economics at the University of Melbourne.

References

Almenberg, J., Dreber, A., Apicella, C. L., & Rand, D. G. (2011). Third party reward and punishment: group size, efficiency and public goods. Psychology and punishment, New York: Nova Publishing.Google Scholar
Andreoni, J., Harbaugh, W., & Vesterlund, L. (2003). The carrot or the stick: rewards, punishment and cooperation. The American Economic Review, 93(3), 893–902. 10.1257/000282803322157142CrossRefGoogle Scholar
Balafoutas, L., & Nikiforakis, N. (2012). Norm enforcement in the city: a natural field experiment. European Economic Review, 56(8), 1773–1785. 10.1016/j.euroecorev.2012.09.008CrossRefGoogle Scholar
Berg, J., Dickhaut, J., & McCabe, K. (1995). Trust, reciprocity, and social history. Games and Economic Behavior, 10, 122–142. 10.1006/game.1995.1027CrossRefGoogle Scholar
Bolton, G. E., & Ockenfels, A. (2000). ERC: a theory of equity, reciprocity, and competition. American Economic Review, 166–193.CrossRefGoogle Scholar
Brandts, J., & Charness, G. (2011). The strategy versus the direct-response method: a first survey of experimental comparisons. Experimental Economics, 14(3), 375–398. 10.1007/s10683-011-9272-xCrossRefGoogle Scholar
Camerer, C. F., Fehr, E. Henrich, J., Boyd, R., Bowles, S., Camerer, C., Fehr, E., & Gintis, H. (2004). Measuring social norms and preferences using experimental games: a guide for social scientists. Foundations of human sociality: economic experiments and ethnographic evidence from fifteen smallscale societies, Oxford: Oxford University Press 55–95. 10.1093/0199262055.003.0003CrossRefGoogle Scholar
Charness, G., Cobo-Reyes, R., & Jimenez, N. (2008). An investment game with third-party intervention. Journal of Economic Behavior & Organization, 68, 18–28. 10.1016/j.jebo.2008.02.006CrossRefGoogle Scholar
Chaudhuri, A. (2011). Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature. Experimental Economics, 14(1), 47–83. 10.1007/s10683-010-9257-1CrossRefGoogle Scholar
Cox, J. C., Friedman, D., & Gjerstadt, S. (2007). A tractable model of reciprocity and fairness. Games and Economic Behavior, 59, 17–45. 10.1016/j.geb.2006.05.001CrossRefGoogle Scholar
Dellarocas, C., & Woods, C. A. (2008). The sound of silence in online feedback: estimating trading risks in the presence of reporting bias. Management Science, 54, 460–476. 10.1287/mnsc.1070.0747CrossRefGoogle Scholar
Denant-Boemont, L., Masclet, D., & Noussair, C. (2007). Punishment, counterpunishment and sanction enforcement in a social dilemma experiment. Economic Theory, 33(1), 145–167. 10.1007/s00199-007-0212-0CrossRefGoogle Scholar
Ellingsen, T., & Johannesson, M. (2008). Anticipated verbal feedback induces altruistic behavior. Evolution and Human Behavior, 29, 100–105. 10.1016/j.evolhumbehav.2007.11.001CrossRefGoogle Scholar
Engelmann, D., & Nikiforakis, N. (2012). In the long run we are all dead: on the benefits of peer punishment in rich environments (Working Paper ECON 12-22). University of Mannheim, Department of Economics.Google Scholar
Fehr, E., & Fischbacher, U. (2004). Third-party punishment and social norms. Evolution and Human Behavior, 25, 63–87. 10.1016/S1090-5138(04)00005-4CrossRefGoogle Scholar
Fehr, E., & Gächter, S. (2000). Cooperation and punishment in public goods experiments. American Economic Review, 90(4), 980–994. 10.1257/aer.90.4.980CrossRefGoogle Scholar
Fehr, E., & Schmidt, K. M. (1999). A theory of fairness, competition, and cooperation. The Quarterly Journal of Economics, 114(3), 817–868. 10.1162/003355399556151CrossRefGoogle Scholar
Fehr, E., Kirchsteiger, G., & Riedl, A. (1993). Does fairness prevent market clearing? An experimental investigation. Quarterly Journal of Economics, 108(2), 437–459. 10.2307/2118338CrossRefGoogle Scholar
Fehr, E., Hoff, K., & Kshetramade, M. (2008). Spite and development. American Economic Review: Papers & Proceedings, 98(2), 494–499. 10.1257/aer.98.2.494CrossRefGoogle Scholar
Fischbacher, U. (2007). Z-tree: Zurich toolbox for readymade economic experiments. Experimental Economics, 10, 171–178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Gächter, S., & Herrmann, B. (2009). Reciprocity, culture, and human cooperation: previous insights and a new cross-cultural experiment. Philosophical Transactions of the Royal Society of London. Series B, Biological Sciences, 364, 791–806. 10.1098/rstb.2008.0275CrossRefGoogle Scholar
Gächter, S., Renner, E., & Sefton, M. (2008). The long run benefits of punishment. Science, 322, 1510 10.1126/science.1164744CrossRefGoogle Scholar
Greiner, B. (2004). An online recruitment system for economic experiments (MPRA paper).Google Scholar
Guala, F. (2012). Reciprocity weak or strong? What punishment experiments do (and do not) demonstrate. Behavioral and Brain Sciences, 35, 1–15. 10.1017/S0140525X11000069CrossRefGoogle ScholarPubMed
Güth, W., Schmittberger, R., & Schwarze, B. (1982). An experimental analysis of ultimatum bargaining. Journal of Economic Behavior & Organization, 3, 367–388. 10.1016/0167-2681(82)90011-7CrossRefGoogle Scholar
Henrich, J., McElreath, R., Barr, A., Ensminger, J., Barrett, C., Bolyanatz, A. et al., (2006). Costly punishment across human societies. Science, 312, 1767 10.1126/science.1127333CrossRefGoogle ScholarPubMed
Houser, D., & Wooders, J. (2006). Reputation in auctions: theory and evidence from eBay. Journal of Economics & Management Strategy, 15(2), 353–370. 10.1111/j.1530-9134.2006.00103.xGoogle Scholar
Levine, D. (1998). Modeling altruism and spitefulness in experiments. Review of Economic Dynamics, 1, 593–622. 10.1006/redy.1998.0023CrossRefGoogle Scholar
Marlowe, F. W., Berbesque, C., Barr, A., Barrett, C. et al., (2008). More ‘altruistic’ punishment in larger societies. Proceedings of the Royal Society of London. Series B, Biological Sciences, 275(1634), 587–592. 10.1098/rspb.2007.1517Google ScholarPubMed
Masclet, D., Noussair, C., Tucker, S., & Villeval, M. C. (2003). Monetary and nonmonetary punishment in the voluntary contributions mechanism. The American Economic Review, 93(1), 366–380. 10.1257/000282803321455359CrossRefGoogle Scholar
McDonald, I., Nikiforakis, N., Olekalns, N., & Sibly, H. (2013). Social comparisons and reference group formation: some experimental evidence. Games and Economic Behavior, 79, 75–89. 10.1016/j.geb.2012.12.003CrossRefGoogle Scholar
Nikiforakis, N. (2008). Punishment and counter-punishment in public good games: can we really govern ourselves?. Journal of Public Economics, 92(1–2), 91–112. 10.1016/j.jpubeco.2007.04.008CrossRefGoogle Scholar
Noussair, C., & Tucker, S. (2005). Combining monetary and social sanctions to promote cooperation. Economic Inquiry, 43(3), 649–660. 10.1093/ei/cbi045CrossRefGoogle Scholar
Rabin, M. (1993). Incorporating fairness into game theory and economics. The American Economic Review, 83(5), 1281–1302.Google Scholar
Rand, D., Dreber, A., Ellingson, T., Fudenberg, D., & Nowak, M. (2009). Positive interactions promote public cooperation. Science, 325(5945), 1272–1275. 10.1126/science.1177418CrossRefGoogle ScholarPubMed
Reuben, E., & van Winden, F. (2008). Social ties and coordination on negative reciprocity: the role of affect. Journal of Public Economics, 92(1–2), 34–53. 10.1016/j.jpubeco.2007.04.012CrossRefGoogle Scholar
Rockenbach, B., & Milinski, M. (2006). The efficient interaction of indirect reciprocity and costly punishment. Nature, 444, 718–723. 10.1038/nature05229CrossRefGoogle ScholarPubMed
Sefton, M., Shupp, R., & Walker, J. (2007). The effect of rewards and sanctions in provision of public goods. Economic Inquiry, 45(4), 671–690. 10.1111/j.1465-7295.2007.00051.xCrossRefGoogle Scholar
Sutter, M., Haigner, S., & Kocher, M. (2010). Choosing the stick or the carrot? Endogenous institutional choice in social dilemma situations. Review of Economic Studies, 77, 1540–1566. 10.1111/j.1467-937X.2010.00608.xCrossRefGoogle Scholar
Ule, A., Schram, A., Riedl, A., & Cason, T. (2009). Indirect punishment and generosity toward strangers. Science, 326(5960), 1701–1704. 10.1126/science.1178883CrossRefGoogle ScholarPubMed
Walker, J. H., & Halloran, M. A. (2004). Rewards and sanctions and the provision of public goods in one-shot settings. Experimental Economics, 7(3), 235–247. 10.1023/B:EXEC.0000040559.08652.51CrossRefGoogle Scholar
Xiao, E., & Houser, D. (2005). Emotion expression in human punishment behavior. Proceedings of the National Academy of Sciences of the United States of America, 102(20), 7398–7401. 10.1073/pnas.0502399102CrossRefGoogle Scholar
Xiao, E., & Houser, D. (2009). Avoiding the sharp tongue: anticipated written messages promote fair economic exchange. Journal of Economic Psychology, 30, 393–404. 10.1016/j.joep.2008.12.002CrossRefGoogle Scholar