Abstract
People can become less cooperative when threatened with sanctions, and previous research has pointed to both intentions and incentives as sources of this effect. This paper reports data from a novel experiment aimed at determining the relative importance of intentions and incentives in producing non-cooperative behavior in a personal exchange environment. Subjects play a one-shot investment game in pairs. Investors send an amount to trustees and request a return on this investment and, in some treatments, are given the option to threaten sanctions to enforce this return request. The decisions of trustees who face credible threats intentionally imposed (or not) by their investors are compared to the decisions of trustees who face credible threats randomly imposed (or not) by nature. When not threatened, trustees typically decide to return a positive amount that is less than the investor requested. When threatened with sanctions this decision becomes least common. In particular, under severe sanction threats most trustees return the desired amount, while under weak threats the most common decision is to return nothing. These results do not depend on whether trustees are threatened intentionally by their investors or randomly by nature. We suggest that credible sanction threats generate a cognitive shift that crowd-out norm-based social behaviors and increase the likelihood of income-maximizing decisions.
Highlights
Sanctions are widely used to promote compliance in exchange environments
The only difference between our random and intention treatments is that investors cannot have punishment intentions in the former, and it is not reasonable to expect that trustees would assign punishment intentions to investors in the random treatment
It is worth emphasizing that we find no evidence supporting punishment intention effects
Summary
Sanctions are widely used to promote compliance in exchange environments. For example, an employer might wish to implement a policy requiring a specific level of employee effort, with fines levied upon those who shirk. Under threats employees might shirk less yet still more than directed, or perhaps shirk even more than they had previously Avoiding such inefficient outcomes is a matter of substantial practical importance, and requires developing a thorough understanding regarding conditions under which threats of sanctions promote cooperation and, when not, how they are likely to fail. Our design compares outcomes between a replication of F&R’s “intentions” treatment and a new treatment where sanction threats are randomly assigned to trustees by nature. In this way we provide cogent evidence distinguishing sanctions’ intention and incentive effects. We discuss below the psychological concepts of cognitive dissonance (Akerlof and Dickens, 1982; Festigner, 1957; Konow, 2000; Rabin, 1994) and self-serving bias (Babcock and Loewenstein, 1997), and point out these theories can reconcile our and others’ findings regarding intention effects
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