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Social Choice and Welfare

, Volume 45, Issue 3, pp 561–577 | Cite as

In the long-run we are all dead: on the benefits of peer punishment in rich environments

  • Dirk EngelmannEmail author
  • Nikos Nikiforakis
Article

Abstract

We investigate whether peer punishment is an efficient mechanism for enforcing cooperation in an experiment with a long time horizon. Previous evidence suggests that the costs of peer punishment can be outweighed by the benefits of higher cooperation if (i) there is a sufficiently long time horizon and (ii) punishment cannot be avenged. However, in most instances in daily life, when individuals interact for an extended period of time, punishment can be retaliated. We use a design that imposes minimal restrictions on who can punish whom or when, and allows participants to employ a wide range of punishment strategies including retaliation of punishment. Similar to previous research, we find that, when punishment cannot be avenged, peer punishment leads to higher earnings relative to a baseline treatment without any punishment opportunities. However, in the more general setting, we find no evidence of group earnings increasing systematically or significantly over time relative to the baseline treatment. Our results raise questions under what conditions peer punishment can be an efficient mechanism for enforcing cooperation.

JEL Classification

C92 D70 H41 

Notes

Acknowledgments

Financial support from the Faculty of Business and Economics at the University of Melbourne is gratefully acknowledged. We would like to thank Jun Wey Lee for research assistance and two anonymous referees, as well as participants at the Workshop “Experiments on Conflicts, Inequality and Incentives” at Université de Rennes 1, at the Econometric Society European Meeting in Göteborg and the annual meeting of the Verein für Socialpolitik in Düsseldorf for helpful comments. Dirk Engelmann is a Research Associate at CERGE-EI, Prague, the Czech Republic.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.Department of EconomicsHumboldt-Universität zu BerlinBerlinGermany
  2. 2.Centre for Experimental EconomicsUniversity of CopenhagenCopenhagenDenmark
  3. 3.CERGE-EIPragueCzech Republic
  4. 4.CESifoMunichGermany
  5. 5.New York University Abu DhabiAbu DhabiUnited Arab Emirates

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