Carry a big stick, or no stick at all An experimental analysis of trust and capacity of punishment

Vicente Calabuig (), Enrique Fatas (), Gonzalo Olcina () and Ismael Rodriguez-Lara
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Vicente Calabuig: ERICES, Universidad de Valencia

No 413, Discussion Papers in Economic Behaviour from University of Valencia, ERI-CES

Abstract: We investigate the effect of punishment in a trust game with endowment heterogeneity in which the investor may punish the allocator at a cost. Our results indicate that the effect of the punishment crucially depends on the investor’s capacity of punishment, that is measured in our experiment by the proportion of the allocator’s payoffs that the investor can destroy. We find that punishment fosters trust when the capacity of punishment is high (i.e., when the cost of punishing is relatively low). Otherwise, punishment fails to promote trusting behavior, crowding out intrinsic motivation to trust. Trustworthiness is higher with punishment than without punishment, except if investors have a high capacity of punishment

Keywords: Trust game; punishment; crowding-out; intrinsic and extrinsic motivation; experimental economics (search for similar items in EconPapers)
JEL-codes: C91 D02 D03 D69 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-gth, nep-hrm and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:dbe:wpaper:0413

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