Fehr and Gachter - Cooperation and Punishment Flashcards
Cooperation and Punishment in Public Goods Experiments (24 cards)
What are the 2 X 2 tradement conditions in the experiment?
A public good experiment with punishment opportunities and without punishment opportunities x stranger or partners
In the treatment without punishment opportunities, what is the dominant strategy?
Complete free riding is a dominant strategy
What is notable about punishment in this experimental design?
Punishing is costly for the punisher, making it irrational from a purely self-interested perspective
How does this work differ from Hirschleifer and Rasmusen’s (1989) study?
In their study, ostracising non-cooperators is part of the subgame perfect eqm and thus rational for selfish group members. But in Fehr and Gachter’s experiments, cooperation or punishment can never be part of a subgame perfect eqm if rationality and selfishness are common knowledge.
What is the difference between the “Stranger” and “Partner” treatments?
In the partner treatment, subjects play a finitely repeated public good game for 10 periods with the same group composition, while in the Stranger treatment, the group us randomly changed from period to period.
What maximises aggregate payoff in the game?
Full cooperation by all group members maximises the aggregate payoff.
What additional stage exists in the punishment condition?
A second decision stage after the simultanous contribution decision, where subjects can punish other group members at a cost to themselves.
What is the eqm prediction if selfishness is common knowledge and subjects apply backward induction?
In all four treatment conditions, all subjects will contribute nothing to the public good in all periods.
How was fairness expected to play a role in this experiement?
Subjects strongly dislike being the “sucker” - those who cooperate while other group members free ride.
How did punishment opportunities affect average contribution levels in the Stranger treatment?
Punishment opportunities caused a large rise in average contribiution levels (58% of the endowmment) which was 2-4 times higher than in the no-punishment condition
How did contribution patterns evolve over time in the Stranger treatment?
In the no-punishment condition, average contributions converged closer to free riding over time. In contrast, in the punishment condition, average contributions did not decrease over time. Comparatively, the average contribution was 6-7.5 times higher than in the no-punishment condition.
What became the dominant behavioural standard in the Partner treatment with punishment?
Full cooperation emerged as the dominant behavioural standard (82.5% contributed their while endowment), whereas in the absence of punishment, full free riding was the focal action (53%)
What did the regression analysis show about punishment behaviour?
The coefficient of “absolute negative deviation” was positive and highly significant, while the size of positive deviations had no signficant impact on punishment. Free riders could reduce recieved punishment by increasing their contributions relative to other group members.
How did punishment opportunities affect the payoffs of free riders?
Punishment reduced the payoff of those with high propensity to free ride in two ways: they were punished more heavily AND they contributed more to the project in the punishment condition.
How did punishment opportunities affect relative payoffs over time?
Punishment initially caused a payoff loss but towards the end, there was a relatigve payoff gain in both treatments (approximately 20% Partner treatment and 10% in Stranger treatment)
What factors contributed to the temporal pattern of relative payoffs?
(1) More punishment activities in early periods (especially in Partner treatment)
(2) Gradual decline of contributions in the no-punishment condition
What did the results suggest about the efficiency implications of punishment opportunities?
The presence of punishment opportunities eventually leads to pecuniary efficiency gains, but it requires establishing the credibility of the punishment threat through actual punishments.
What key insight did the study provide about punishment in public goods contexts?
Spontaneous and uncoordinated punishment activities rise to heavy punishment is costly and provides no material benefits to the punisher.
What does this study reveal about human behaviour that contradicts standard economic assumptions?
People are willing to engage in costly punishment of non-cooperators even when it provides no material benefit to themselves, contradicting the assumption of purely self-interested behaviour.
What is the monetary payoff with punishment?
Where for each punishment point, the first stage payoff is reduced by 10 percent.
What is the monetary payoff without punishment?
In the partner treatments, how did the individual contributions in the final periods compare in the punishment condition versus the no-punishment condition?
82.5% of the subjects contributed their whole endowment, whereas 53% of the same subjects free ride fully in the final period of the no punishment condition.
What were the key results from their Tobit regressions?
0.24 (Stranger) vs 0.41 (Partner) coefficients for absolute negative deviation, where the dependent variable is “received punishment points” of a subject.
On average, how much do free riders. raise their contributions by relative to the no punishment condition?
Between 50 and 60 percent of their endowment (10-12 tokens)
