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Mixing the carrots with the sticks: third party punishment and reward

Published online by Cambridge University Press:  14 March 2025

Nikos Nikiforakis  and
Helen Mitchell
Nikos Nikiforakis*
Affiliation:
GATE, CNRS, Lyon, France Max-Planck Institute for Research on Collective Goods, Bonn, Germany Department of Economics, The University of Melbourne, Parkville, Australia
Helen Mitchell
Affiliation:
Department of Foreign Affairs and Trade, Australian Government, Barton, Australia
*
n.nikiforakis@gmail.com
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Abstract

While the opportunity to punish selfish and reward generous behavior coexist in many instances in daily life, in most laboratory studies, the demand for punishment and reward are studied separately from one another. This paper presents the results from an experiment measuring the demand for reward and punishment by ‘unaffected’ third parties, separately and jointly. We find that the demand for costly punishment is substantially lower when individuals are also given the ability to reward. Similarly, the demand for costly reward is lower when individuals can also punish. The evidence indicates the reason for this is that costly punishment and reward are not only used to alter the material payoff of others as assumed by recent economic models, but also as a signal of disapproval and approval of others’ actions, respectively. When the opportunity exists, subjects often choose to withhold reward as a form of costless punishment, and to withhold punishment as a form of costless reward. We conclude that restricting the available options to punishing (rewarding) only, may lead to an increase in the demand for costly punishment (reward).

Keywords

PunishmentRewardSocial normsNorm enforcementThird party

JEL classification

D63: Equity, Justice, Inequality, and Other Normative Criteria and Measurement H41: Public Goods C91: Laboratory, Individual Behavior
Type
Manuscript
Information
Experimental Economics , Volume 17 , Issue 1 , March 2014 , pp. 1 - 23
Copyright
Copyright © 2013 Economic Science Association

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Footnotes

We would like to thank the Co-Editor (Jacob Goeree), two anonymous referees, Aurelie Dariel, Peter Duersch, Simon Loertscher, Tom Wilkening, participants at the Asia-Pacific meetings of the Economic Science Association in Melbourne (2010), the 5th Australian-New Zealand Workshop in Experimental Economics, and seminar participants at Monash University, the University of Innsbruck, and the University of Melbourne for helpful comments and discussions. The results from the ‘first wave’ of the experiments formed the basis for Helen’s Honors thesis at the University of Melbourne. The authors acknowledge funding from the Department of Economics, and the Faculty of Business and Economics at the University of Melbourne.

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