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Punishment and Cooperation in Stochastic Social Dilemmas

Erte Xiao () and Howard Kunreuther

No 18458, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Previous findings on punishment have focused on environments in which the outcomes are known with certainty. In this paper, we conduct experiments to investigate how punishment affects cooperation in a two-person stochastic prisoner's dilemma environment where each person can decide whether or not to cooperate, and the outcomes of alternative strategies are specified probabilistically under a transparent information condition. In particular, we study two types of punishment mechanisms: 1) an unrestricted punishment mechanism: both persons can punish; and 2) a restricted punishment mechanism: only cooperators can punish non-cooperators. We show that the restricted punishment mechanism is more effective in promoting cooperative behavior than the unrestricted one in a deterministic social dilemma. More importantly, the restricted type is less effective in an environment where the outcomes are stochastic than when they are known with certainty. Our data suggest that one explanation is that non-cooperative behavior is less likely to be punished when there is outcome uncertainty. Our findings provide useful information for designing efficient incentive mechanisms to induce cooperation in a stochastic social dilemma environment.

JEL-codes: C72 C73 C91 D02 D03 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-cdm, nep-evo, nep-exp, nep-gth and nep-soc
Note: TWP
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Published as E. Xiao & H. Kunreuther, 2016. "Punishment and Cooperation in Stochastic Social Dilemmas," Journal of Conflict Resolution, vol 60(4), pages 670-693.

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