Choosing the Stick or the Carrot? Endogenous Institutional Choice in Social Dilemma Situations

Stefan Haigner, Martin Georg Kocher () and Matthias Sutter ()

No 5497, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyse an experimental public goods game in which group members can endogenously determine whether they want to supplement a standard voluntary contribution mechanism with the possibility of rewarding or punishing other group members. We find a large and positive effect of endogenous institutional choice on the level of cooperation in comparison to exogenously implemented institutions. This suggests that democratic participation rights enhance cooperation in groups. With endogenous choice, groups typically vote for the reward option, even though punishment is actually more effective in sustaining high levels of cooperation. Our results are evaluated against the predictions of social preference models.

Keywords: endogenous institutional choice; experiment; public goods; punishment; reward; voting (search for similar items in EconPapers)
JEL-codes: C72 C91 C92 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp, nep-pol and nep-soc
Date: 2006-02
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