State or Nature: Formal vs. Informal Sanctioning in a Voluntary Contribution Game. Kenju Kamei* Louis Putterman* Jean-Robert Tyran** * Brown University ** University of Copenhagen University of Vienna. Why State or Nature?.
* Brown University ** University of Copenhagen
University of Vienna
Locke argued that the state is necessary due to the unreliability of informal sanctions and the problem of counter-punishment:
… the irregular and uncertain exercise of the power every man has of punishing the transgressions of others, make them take sanctuary under the established laws of government … It is this makes them so willingly give up every one his single power of punishing, to be exercised by such alone, as shall be appointed to it amongst them; and by such rules as the community, or those authorized by them to that purpose, shall agree on. (§. 127.)
If putting the power to punish in the hands of a central authority is the hallmark of civilization, why have we experimental economists been so focused on informal (horizontal, decentralized) rather than formal (vertical, centralized) sanctioning systems in our research of the past dozen years?
Note: some real world settings how groups would structure formal sanction schemes if given the opportunity.mix formal and informal sanctions.
By treating formal and informal sanctions as substitutes rather than complements, we abstract from this.
Kube and Traxler (2010) study the combination of a non-deterrent formal sanction and informal sanctions (in exogenously imposed treatments).
Formal Sanctions (FS) exogenously to sanctioning schemes, we
Formal Sanctions (FS) exogenously to sanctioning schemes, we
Earning from Private Account
Earning from Public Account
IQ test and exogenously to sanctioning schemes, we
additional round 1.5
IQ test and
additional round 0.5
NS: No Sanctions
FS: Formal Sanctions
IS: Informal Sanctions
CS: Chosen sanctions scheme
: Indicates a vote on
method of sanction
Notes: population at Brown University and interacted via computer in a computer lab NS = no sanctions, FS = formal sanctions, IS = informal sanctions. The experiment as a whole consisted of 16 sessions in which 61 groups consisting of 305 individual subjects participated. There were a total of 183 group votes on the use of FS versus IS, with 915 individual votes cast.
(Theoretical Predictions, cont.) population at Brown University and interacted via computer in a computer lab
Having three voting stages* may complicate choice-theoretic predictions, so Markussen, Putterman & Tyran are studying treatments with only one voting stage, whereas the present paper allows testing predictions about what formal sanctions schemes subjects construct, at the cost of this added complexity.
* when FS chosen, i.e. 1. Formal/informal; 2. Public/private; 3. Penalty rate.
1. Which sanctions scheme do groups prefer?
Most groups choose informal over formal sanctions when the latter entail a fixed cost, and most groups choose formal over informal sanctions when they do not.
Note: This and other results hold in both 6-Vote and 3-Vote treatments. (6-Vote subjects act in vote 1, Phase 1, like their more experienced 3-Vote counterparts in vote 1, Phase 4…as if they predict well!)
Choice of informal or formal sanctions (vote outcomes) in 3-vote and 6-vote treatments with and without administrative cost of FS
2. What is sanctioned and at what rate, when FS is chosen?
Groups almost always select to penalize contributing to the private (not public) accounts, and the sanction rate is usually but not always “deterrent” (1.2 or 0.8) rather than non-deterrent (0.4 or 0.0).
Note: There are indications of a tendency to choose a higher fine rate in later periods of the two 6-Vote treatments (learning?)(based on regression analysis of the groups that always chose FS in those treatments).
3. How does IS perform when chosen?
IS works much better than it “should” according to standard theory, usually achieving contributions and efficiencies not significantly different from those with formal sanctions and almost always signicantly higher than with NS.
Average fine rate in later periods of the two 6-Vote treatments (learning?)contribution, all treatments
( fine rate in later periods of the two 6-Vote treatments (learning?)a) 6-N treatment
(b) 6-C treatment
Average earnings under IS and FS in the two 6-Vote treatments (N = no administrative cost, C = administrative cost)
4. How much and what punishing occurs when IS is chosen?
The effectiveness of IS is associated with the fact that many subjects do incur the cost of punishing and most punishment is given to low contributors.
We identify as “perverse” any punishment that is given to a group member who contributed more than the median amount during the period in question.
5. Do contributions under FS depend on the sanction rate in the manner predicted by standard theory?
Not entirely.Average contribution under FS varies with the sanction level in a semi-continuous fashion, including:
(contributions under formal sanctions) to a group member who contributed more than the median amount during the period in question.
- more at fine of 1.2 than at fine of 0.8 although both should induce contribution of full endowment
- more at fine of 0.4 than at fine of 0.0 although 0.4 is a “non-deterrent sanction” that should not affect contribution for uniformly rational, self-interested subjects with common knowledge
- effectiveness of voted non-deterrent sanction of 0.4 is the most important departure from standard prediction
Contributions under formal scheme by sanction rate to a group member who contributed more than the median amount during the period in question.
6. Does IS perform better when chosen than when assigned endogenously?
Yes. The average efficiency associated with informal sanctions is higher in Phase 2 of Treatment 6-C groups that chose IS than in “exogenous IS comparison treatment” in which IS is assigned to the subjects by the experimenters. The same applies in a parallel comparison with an exogenous IS treatment in Markussen et al.
Endogenous IS (4 groups) vs. Exogenous IS (6 groups) endogenously?
* See Nikiforakis (2008), “Punishment & Counter-Punishment: Can we still govern ourselves?”; also Denant-Boemont, Masclet, Noussair
Thank you. significant (based on M-W tests with group-level observations) in our study, whereas they