Punishment and efficiency: theoretical and experimental approaches
2018
In this dissertation I present three research works, two theoretical and one experimental, which feature three different punishment structures which enhance cooperation in social dilemmas.
Social dilemmas are characterized by the misalignment of private and social incentives under selfish preferences. While the social optimum is reached with the implementation of a particular set of actions, private incentives move agents to behave in a different way, leading to inefficient outcomes. A classic example is the provision of a public good, where the optimum is reached if everybody contributes to it, but there is a profitable unilateral deviation to free ride.
In order to conceal the free rider issue, many have been the mechanisms proposed, from which sanctioning has been the one that has acquired greater relevancy. Providing individuals the opportunity to sanction each other achieves, in general terms, a diminishment in deceitful behaviour and bridges the gap to the efficient outcome. However, in these terms, not any kind of implementation of a sanctioning system is enough in accomplishing such purpose.
As a response to the downside of peer punishment, sanctioning literature has proposed two alternative punishment schemes that I employ in this work: (i) pool punishment and (ii) coordinated punishment.
In Chapter 2 of this dissertation I present a literature review describing the free rider issue as well as the impact of relaxing the different assumptions of the standard public goods game model. Moreover, I propose four mechanisms to address the issue, making particular emphasis on sanctioning. Finally, I examine the state of the art of various punishment schemes.
Chapter 3 is a theoretical work analysing the emergence and performance of a sanctioning institution in a public goods provision context. This work analyses under which conditions will a high-performance sanctioning institution be implemented, what is the level of public good provision achieved and, in last place, its efficiency.
Chapter 4 is an experimental work exploring the impact of two different payoff schemes in a centralized sanctioning environment. The main question to approach is how should the implementation of punishment from these centralized institutions work, for which we compare two payoff schemes: (i) a fixed scheme and (ii) a variable scheme. This work emphasizes the benefits in terms of contributions and efficiency of centralized punishment systems with fixed payoff schemes.
In last place, Chapter 5 of this dissertation is a theoretical work comparing two different decentralized punishment schemes in a team trust game with information asymmetries: (i) an uncoordinated punishment system and (ii) a coordinated punishment scheme. Results reveal that a coordinated punishment system leads to efficient equilibria in a wider range of cases than uncoordinated punishment when the proportion of reciprocators in the population of investors is sufficiently high.
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