Risky Punishment and Reward in the Prisoner

Peter Dürsch and Maros Servátka ()
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Maros Servátka: Department of Economics, University of Canterbury, Postal: Private Bag 4800, Christchurch, New Zealand

No 07-62, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: We conduct a prisoner’s dilemma experiment with a punishment/reward stage, where punishments and rewards are risky. This is compared with a risk free treatment. We find that subjects do not change their behavior in the face of risky outcomes. Additionally, we measure risk attitude and the emotions of subjects. While we find a strong influence of emotions, individual risk aversion has no effect on the decision to punish or reward. This is good news for lab experiments who abstract from risky outcomes. From the perspective of social preferences, our results provide evidence for risk neutral inclusion of other player’s payoffs in the decisionmaker’s utility function.

Pages: 20 pages
Date: 2007-09-05
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-upt
Note: We gratefully acknowledge productive comments and suggestions of Joerg Oechssler, Wendelin Schnedler, and the participants of the Universität Heidelberg departmental seminar. We thank Timo Goeschl for allowing us to run the experiment in his class and Adam Dominiak for research assistance. Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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