Asymmetric Behavioral Effects of Informal Sanction and Reward on Cooperation in an Experimental Public Good Game

Abstract

This study reports data from a laboratory experiment that investigates the effects of nonmonetary sanctions and rewards on cooperation in a standard public good game. We use performance based disapproval and approval ratings for nonmonetary sanction and reward, respectively. The treatments vary in terms of subjects' opportunities to assign (1) only the approval ratings to other group members, (2) only the disapproval ratings to other group members, and (3) either the approval or the disapproval ratings (but not both) to other group members, after they play a public good game. Since these ratings are costless, payoff irrelevant, and are assigned anonymously, the Nash prediction for all the games is still the zero individual contribution. The results show, however, that the contributions are significantly higher in all the treatments relative to the baseline treatment where no such rating exists. However, the approval ratings generate significantly lower contributions than that of the disapproval ratings. The treatment in which subjects could assign either the approval or the disapproval ratings produces the highest level of contributions. We conclude that the induced approval and disapproval ratings have asymmetric behavioral effects on cooperation. We discuss the implications that these findings may have for design of efficient institutions.