On the emergence of a sanctioning institution

Adriana Alventosa () and Gonzalo Olcina ()
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Adriana Alventosa: Universidad de Valencia. ERI-CES

No 417, Discussion Papers in Economic Behaviour from University of Valencia, ERI-CES

Abstract: This paper theoretically studies the emergence of a sanctioning institution in a selfish and wealth-diverse group where the provision of a public good is realized only once. In particular, we present a public goods game where players are given the opportunity to implement a sanctioning institution by hiring an external enforcer which sanctions free-riding behavior. However, the enforcer's effectiveness will not be guaranteed and will depend on the level of effort he exerts to chase these opportunistic attitudes. Whether the sanctioning institution is implemented or not is a task delegated to a government concerned in its persistence, who will represent the interests of a social class with a particular level of wealth. The emergence of the sanctioning institution will depend on a set of institutional and technological parameters, the wealth distribution in the society and the identity of the social class whose interests are represented by the government. Given these exogenous variables, the sanctioning institution will emerge more easily if the government represents the social class with the lowest opportunity cost in the provision of a public good. If implemented, the sanctioning institution can achieve a positive provision of such good if the society counts with a relatively high quality in its sanctioning institutions and high social return of the public good. The case of heterogeneous valuations of the public good will also be proved to show symmetric results.

Keywords: public goods game; cooperation; wealth inequality; pool punishment; moral hazard. (search for similar items in EconPapers)
JEL-codes: C72 D02 H41 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-exp, nep-gth and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:dbe:wpaper:0417

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