Both peer-to-peer punishment and institutions that sanction free-riders can lead to the more efficient provision of public goods. However, financial incentives can, in some cases, crowd out cooperative behaviour. We study how individuals react to the combination of these institutions. This is particularly relevant to understanding how the introduction of formal institutions affects societies that principally rely on informal mechanisms for enforcing cooperative norms. As such, we conducted the experiment in rural Uganda, where public goods are often managed informally, with a varying degree of formal regulation.
Automatic and interpersonal punishment in a public goods game in rural Uganda
The experiment consists of a standard public goods game with punishment, and an additional feature: an automatic punishment mechanism that imposes a fine on subjects whose contributions fall below a certain threshold. We test how this affects public good contributions and to willingness to punish free riders. We find that certain individuals refrain from punishing free riders when the automatic sanction is present, and that this correlates with attitudes towards formal authorities outside of the lab.
Interestingly, exposure to automatic sanctioning affects willingness to punish free riders even when the institution is not present. These findings have implications for understanding how incomplete formal institutions affect informal cooperation.