How Large Should the “Bullets” be? Dissecting the Role of Unilateral and Tie Punishment in the Provision of Public Goods

Jia Liu, Yohanes Riyanto and Ruike Zhang

MPRA Paper from University Library of Munich, Germany

Abstract: This paper evaluates the role of centralized punishment in boosting contribution to the provision of public goods. To avoid the race to the bottom in the provision of public goods, this centralized punishment mechanism relies on the use of the unilateral and tie punishment imposed on the lowest contributor(s). In this paper, we aim to examine how severe this unilateral and tie punishment should be to achieve the full-contribution equilibrium. Specifically, we are interested in investigating the size of the “bullets” that the “hired gun” should carry. We theoretically derive a range of punishment mechanisms which would lead to full contribution and which are also experimentally tested. Our experimental results generally substantiate the theoretical prediction except for the more lenient punishment parameters. This discrepancy is successfully explained by individual evolutionary learning.

Keywords: Public Goods Provision; Centralized Punishment Mechanism; Unilateral Punishment; Tie Punishment; Individual Evolutionary Learning (search for similar items in EconPapers)
JEL-codes: C63 C72 C92 D7 D83 H41 (search for similar items in EconPapers)
Date: 2017-07-20
New Economics Papers: this item is included in nep-exp
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