How Large Should the “Bullets” be? Dissecting the Role of Unilateral and Tie Punishment in the Provision of Public Goods

Liu, Jia and Riyanto, Yohanes Eko and Zhang, Ruike (2017): How Large Should the “Bullets” be? Dissecting the Role of Unilateral and Tie Punishment in the Provision of Public Goods.

Abstract

This paper evaluates the role of centralized punishment in boosting contribution to the provision of public goods. To avoid the race to the bottom in the provision of public goods, this centralized punishment mechanism relies on the use of the unilateral and tie punishment imposed on the lowest contributor(s). In this paper, we aim to examine how severe this unilateral and tie punishment should be to achieve the full-contribution equilibrium. Specifically, we are interested in investigating the size of the “bullets” that the “hired gun” should carry. We theoretically derive a range of punishment mechanisms which would lead to full contribution and which are also experimentally tested. Our experimental results generally substantiate the theoretical prediction except for the more lenient punishment parameters. This discrepancy is successfully explained by individual evolutionary learning.

• Item Type: MPRA Paper
• Language: English
• Keywords: Public Goods Provision, Centralized Punishment Mechanism, Unilateral Punishment, Tie Punishment, Individual Evolutionary Learning
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior; D - Microeconomics > D7 - Analysis of Collective Decision-Making; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods

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