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Deterrence by Imperfect Sanctions – A Public Good Experiment

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Engel,  Christoph
Max Planck Institute for Research on Collective Goods, Max Planck Society;

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Citation

Engel, C. (2013). Deterrence by Imperfect Sanctions – A Public Good Experiment.


Cite as: http://hdl.handle.net/11858/00-001M-0000-0028-6DBA-4
Abstract
Sanctions are often so weak that a money maximizing individual would not be deterred. In this paper I show that they may nonetheless serve a forward looking purpose if sufficiently many individuals are averse against advantageous inequity. Using the Fehr/Schmidt model (QJE 1999) I define three alternative channels: (a) identical preferences are common knowledge, but inequity is not pronounced enough to sustain cooperation; (b) heterogeneous preferences are common knowledge; (c) there is preference uncertainty. In a linear public good with punishment meted out by a disinterested participant, I test two implications of the model: (a) participants increase contributions in reaction to imperfect punishment; (b) imperfect punishment helps sustain cooperation if participants experience free-riding