The function of peer reward and punishment in localized society: We can only “Think locally, Act locally”

Hiroki Ozono (), Yoshio Kamijo and Kazumi Shimizu
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Hiroki Ozono: Faculty of Law, Economics and Humanities, Kagoshima University

No 1912, Working Papers from Waseda University, Faculty of Political Science and Economics

Abstract: Many studies suggest that peer reward and punishment can sustain cooperation in social dilemmas because cooperators are effectively rewarded and non-cooperators are effectively punished within the group. However, as group size becomes larger, we inevitably face localization, in which a global group is divided into several localized groups. While benefits from cooperation are distributed to the global group, members can reward and punish only other members within the same localized group. In this situation, the global group and the local group are not always equal in terms of welfare; situation can arise in which cooperation is beneficial for the global group but not for the local group. We predict that in such a locally inefficient situation, peer reward and punishment cannot function to sustain global cooperation, and high cooperation cannot be achieved. We conducted an experiment in which 16 group members played a public goods game with peer reward and punishment. We manipulated the range of peer reward and punishment (only local members/all members) and payoff structure (locally efficient/locally inefficient). We found that high cooperation was not achieved and that peer reward and punishment did not function when, and only when, the group was divided into localized groups and the payoff structure was locally inefficient. This finding suggests that the function of peer reward and punishment is limited to relatively small societies, and we humans can only “think locally, act locally.”

Keywords: Public goods; Reward; Punishment; Localization; Cooperation (search for similar items in EconPapers)
Pages: 32 pages
Date: 2019-07
New Economics Papers: this item is included in nep-cdm and nep-exp
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