State or nature? Endogenous formal versus informal sanctions in the voluntary provision of public goods

• Published in: Experimental economics : a journal of the Economic Science Association Vol. 18; no. 1; pp. 38 - 65
• Main Authors: Kamei, Kenju, Putterman, Louis, Tyran, Jean-Robert
• Format: Journal Article
• Language: English
• Published: Boston Springer US 01.03.2015; Springer Nature B.V
• Subjects: Analysis; Behavioral/Experimental Economics; Collective action; Design; Economic theory; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Endogenous; Enforcement; Experiments; Fines & penalties; Forecasts; Game Theory; Microeconomics; Operations Research/Decision Theory; Original Paper; Public good; Public goods; Punishment; Research subjects; Sanctions; Social and Behav. Sciences; Studies; Voters; Punishment; H41; Voluntary contribution mechanism; Experiment; D03; C91; Sanction; Public goods; C92; Social dilemma; D71
• ISSN: 1386-4157; 1573-6938
• DOI: 10.1007/s10683-014-9405-0

We investigate the endogenous formation of sanctioning institutions supposed to improve efficiency in the voluntary provision of public goods. Our paper parallels Markussen et al. (Rev Econ Stud 81:301–324, 2014 ) in that our experimental subjects vote over formal versus informal sanctions, but it goes beyond that paper by endogenizing the formal sanction scheme. We find that self-determined formal sanctions schemes are popular and efficient when they carry no up-front cost, but as in Markussen et al. informal sanctions are more popular and efficient than formal sanctions when adopting the latter entails such a cost. Practice improves the performance of sanction schemes: they become more targeted and deterrent with learning. Voters’ characteristics, including their tendency to engage in perverse informal sanctioning, help to predict individual voting.