The Role of Reward in Cooperation-Enhancing and Welfare-Improving Under Imperfect information: Theory and Evidence

Jingjing Pan, Jianbiao Li and Chengkang Zhu

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: Although previous literature demonstrates that punishment is more efficient and stable than reward, in our daily life, numerous kinds of rewards permeate. One possible explanation for widely use of reward institution in practice is that it’s an efficient and satisfactory way to enhance cooperation and welfare in a social dilemma situation even the contribution is hardly evaluated accurately. Nevertheless, this explanation lacks support from empirical evidence. Our study aims to examine whether the institution with reward option is an efficient and satisfactory way to solve social dilemma problems under imperfect information conditions. We show that reward institutions sustain higher cooperation levels and let participants get more welfare under imperfect information conditions. Furthermore, we find most participants to have a tendency to favor reward institutions, even when the information is highly noisy. Our study sheds light on the superiority of reward institutions over punishment institutions in a realistic world.

Keywords: Public goods games; Reward; Imperfect information; Cooperation; Welfare (search for similar items in EconPapers)
JEL-codes: C91 C92 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cdm, nep-exp and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:269216

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