Peer Sanctions Research Articles

Learning from regulatory failure: How Ostrom's restorative justice design principle helps naïve groups create wiser enforcement systems to overcome the tragedy of the commons.

Rule enforcement is critical in democratic, self-governing societies. Many political disputes occur when citizens do not understand the fundamental rationales for enforcement (e.g., COVID-19 pandemic). We examined how naïve groups learn and develop wise enforcement systems. Based on theories from behavioral economics, political science, psychology, and education, we predicted that groups need to experience failure of an enforcement system, but be guided on restorative justice principles to collectively learn from this failure. Undergraduate students (N = 288) from a Midwestern U.S. metropolitan university self-governed a simulated common-pool resource with real financial payoffs. Groups began with one of three conditions designed to create different experiences with enforcement and regulatory failure: (a) no enforcement (no communication or peer sanctioning), (b) lax enforcement (communication with peer-sanctioning), or (c) regulatory abuse (peer sanctioning without communication). Half then received facilitated guidance on restorative justice principles (e.g., discuss whether/why to use sanctions). To examine cooperation, we measured how well participants maintained the resource. To examine group learning, we created a novel coding system, which tracked groups' constitutional decisions about conservation agreements and enforcement, conceptual understanding, and the enforcement systems they created. The no-enforcement and lax-enforcement conditions quickly yielded moderate cooperation via voluntary agreements. However, such agreements prevented groups from discovering how and why to use enforcement (peer sanctioning) to improve performance. Initial exposure to regulatory failure had different effects depending on facilitation. Unfacilitated groups fixated on initial misconceptions, causing them to abandon or create less sophisticated enforcement systems, hindering cooperation. Facilitated groups learned from prior failure-discovering principles of wise enforcement (e.g., collective efficiency, self-restraint)-and created more sophisticated enforcement systems (e.g., coordinated sanctions) that improved cooperation. Guidance on restorative justice principles and experience with regulatory abuse may be necessary preconditions for naïve individuals to understand and develop wiser collective enforcement systems.

Implicit Incentives and Delegation in Teams

We study an infinitely repeated game of team production, where agents must supply costly effort under moral hazard. The principal also has the option to delegate an additional production-relevant decision to a team member. We provide conditions under which delegation changes the scope of peer sanction and thus influences the implicit incentives generated by the agents’ repeated interaction. Delegation can then become strictly optimal, despite misaligned preferences and symmetric information regarding the efficient decision. We show that implicit incentives under delegation are strongest in diverse teams and use our results to discuss various aspects of organizational design, including self-organized teamwork. This paper was accepted by Suraj Srinivasan, accounting. Funding: This work was supported by the Deutsche Forschungsgemeinschaft [Project-ID 403041268—TRR 266 Accounting for Transparency]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.02212 .

Peer Responses to Environmental Regulatory Sanctions: Local versus Distant Search

Regulators impose sanctions on firms that violate environmental laws or regulations not only to punish the violators but also to warn non-sanctioned firms that environmental misbehaviors may be penalized. Accordingly, non-sanctioned firms are motivated to respond to such sanction threats. Combining problemistic search and threat rigidity theories, we propose that rising environmental regulatory sanctions on industry peers can propel non-sanctioned firms to focus on local search and refrain from distant search, resulting in an increase in environmental lobbying, a direct and immediate strategic action that we consider as an outcome of local search, and a decrease in green innovation, an indirect and long-term strategic action that we consider as an outcome of distant search. We also propose that such effects are stronger when non-sanctioned firms find peer sanctions a more salient threat, reflected by higher media exposure of non-sanctioned firms’ environmental misbehaviors. Using a U.S. sample of 5,893 firm-year observations, we find support for our arguments. This study reconciles problemistic search and threat rigidity theories by highlighting the heterogeneous influence of external threats on local search and distant search and showcases the spillover effect of regulatory sanctions on peer firms.

Long-term relationships, group lending, and peer monitoring in microfinance: Experimental evidence

Microfinance is generally associated with high repayment rates. However, it is not clear what drives such high repayment rates? Does the success of microfinance results only from the use of group lending, peer sanctioning or long-term relationships that typically characterize microfinance contracts? In this paper, we aim to contribute to the existing literature by using a laboratory experiment to disentangle the effect of these different potential mechanisms. Our experiment involves both students and real bankers in the role of lenders. We find that group lending alone, in absence of peer sanctioning mechanisms induces free riding and is not sufficient to mitigate the problems of ex ante and ex post moral hazard. In sharp contrast, we find that individualized long-term relationships perform significantly better than either form of group lending with or without peer sanctioning. Consequently, borrowers’ final payoffs are lower in the group lending schemes than in the individual lending scheme due to the fact that borrowers receive on average fewer loans from lenders in the group lending schemes. Our study also sheds light on the social cost of peer pressure mechanisms.

Correlates of solitary alcohol and cannabis use among American Indian adolescents

BackgroundSolitary substance use, or using substances while alone, is common among adolescents but understudied. This is the first study to examine solitary substance use among American Indian (AI) adolescents. The objective was to examine correlates of solitary alcohol use and solitary cannabis use that occur within the individual, family, school, peer, and cultural domains of the social ecology. MethodData were from the 2009–2013 Drug Use Among Young American Indians Study, a cross-sectional cohort study. Two sets of hierarchical logistic regressions were conducted to examine solitary alcohol use (getting drunk) among lifetime alcohol users (n = 2082; Mage = 15.12 years; SD = 1.68; 54.2% female) and solitary cannabis use among lifetime cannabis users (n = 2085; Mage = 14.99 years; SD = 1.69; 50.5% female), including adjustment for level of substance involvement. ResultsPrevalence of solitary alcohol use among lifetime drinkers was 24.9%. Among lifetime cannabis users, 53.6% reported solitary cannabis use. Regression analyses for solitary alcohol use showed statistically significant positive associations with coping motive, descriptive norms, violent behavior, depression, peer models for use, and (unexpectedly) peer sanctions against use and a negative association with family sanctions against use. Regression analyses for solitary cannabis use showed statistically significant positive associations with coping motive, violent behavior, and peer models for use and a negative association with family sanctions against use. ConclusionsSolitary alcohol and cannabis use are prevalent among AI adolescents and might, in particular, reflect attempts to cope with adversity. Findings could help guide the development of screening and prevention efforts.

Crime and punishment: The challenges of free-riding and peer sanctioning in the rural water sector – Lessons from an innovation in Uganda

Across sub-Saharan Africa the performance of Community Based Management (CBM) for rural water has been disappointing, with studies indicating insufficient funds collected for necessary repairs to the handpumps used to access groundwater, upon which millions depend. Free-riding, usually representing a crime against the collective good, is endemic here because peer sanctioning of transgressors proves socially divisive. This study, the result of extensive fieldwork, presents original data on the outcomes of an alternative model, CBM-lite, piloted in mid-west Uganda. A Water Operator from the community was financially incentivised to collect the user fees, though graduated sanctions were still to be determined and enforced by community structures. CBM-lite saw the repair of handpumps utilising funds released by a microfinance institution due to regular deposits. People are prepared to pay for reactive maintenance, but reject the concept of preventative contributions: free-riding resumed once handpumps were functional because sanctioning again proved too challenging. The paper makes a number of significant contributions to environmental governance debates. First, any management model not designed to overcome the public good problem of free-riding will fail to achieve sustainable results. Second, the research identified deeply ingrained social norms that counter-intuitively consider individual advancement a greater crime than free-riding, condoning social-levelling peer punishment of the pilot Water Operators. Depersonalising interactions via pre-payment technologies may hold potential. Equally, differentiating a hierarchy of social norms may present some leverage for nudging, with context appropriate communication, of less culturally ingrained behaviour, to promote for example an acceptance of preventative maintenance.

Cooperation or Collusion? Rents in Relational Contracts for Teams

This study analyzes relational contracts for multiple agents where participation constraints matter and agents monitor each other. Our model highlights that providing rents to agents strengthens peer sanction endowed within their ongoing relationship, which may have a positive effect toward promoting productive cooperation or a negative effect toward inducing unproductive collusion. An optimal relational contract may involve both peer sanction strengthened by rent provision and relative performance evaluation. The agent’s payoff may be higher for patient parties adopting joint performance evaluation than for impatient parties adopting relative performance evaluation.

Effects of beliefs about sanctions on promoting cooperation in a public goods game

Cooperative behaviour among people facing social dilemmas remains an unsolved puzzle. Sanction systems such as punishment and reward are well-known solutions to social dilemmas. On the one hand, it is theorised that peer sanctions cannot maintain cooperation because of the intrusion of second-order free riders. On the other hand, experimental studies have widely reported that cooperation is sustainable by first-order sanction systems. To understand the divergence between theory and experimental results, we focus on the effects of beliefs about sanctions on promoting cooperation. While previous studies have revealed effects of beliefs about other people’s cooperation in public goods games (PGGs), the effect of beliefs about sanctions have not been considered. We conducted a scenario-based experiment using one-shot PGGs with and without sanction systems. The results revealed that beliefs about sanctions promote cooperation in a PGG when types of sanctions and some psychological attitudes to cooperation are controlled for. Our results indicate that the beliefs of actors promote cooperation despite the possible presence of second-order free riders. A belief about sanctions differs from a preference for cooperative behaviour and the amount a player pays to exercise a sanction. It is necessary to consider players’ beliefs about a sanction when studying its effectiveness.

Social Norms, Endogenous Sorting and the Culture of Cooperation

Throughout human history, informal sanctions by peers were ubiquitous and played a key role in the enforcement of social norms and the provision of public goods. However, a considerable body of experimental evidence suggests that informal peer sanctions cause large collateral damage and efficiency costs. This raises the question whether peer sanctioning systems exist that avoid these costs and whether other, more centralized, punishment systems are superior and will be preferred by the people. Here, we show that welfare-enhancing peer sanctioning without much need for costly punishment emerges quickly if we introduce two relevant features of social life into the experiment: (i) subjects can migrate across groups with different sanctioning institutions and (ii) they have the chance to achieve consensus about normatively appropriate behavior. The exogenous removal of the norm consensus opportunity reduces the efficiency of peer punishment and renders centralized sanctioning by an elected judge the dominant institution. However, if given the choice, subjects universally reject peer sanctioning without a norm consensus opportunity – an institution that has hitherto dominated research in this field – in favor of peer sanctioning with a norm consensus opportunity or an equally efficient institution with centralized punishment by an elected judge. Migration opportunities and normative consensus building are key to the quick emergence of an efficient culture of universal cooperation because the more prosocial subjects populate the two efficient institutions first, elect prosocial judges (if institutionally possible), and immediately establish a social norm of high cooperation. This norm appears to guide subjects’ cooperation and punishment choices, including the virtually complete removal of antisocial punishment when judges make the sanctioning decision.

Why the West Became Wild

Settlers flocking to boomtowns on the American western frontier were faced with the same task that communities in weak states across the globe face in contemporary times: self-governance. Peer sanctions can enforce cooperation in these environments, but their efficacy depends on the social networks that transmit information from peer to peer. The author uses a game-theoretic model to show that peripheral network positions can generate such strong incentives to misbehave that persistent cheating occurs in equilibrium. The model reveals that groups maintaining high levels of cooperation that face shocks to their strategic environment or to their network can ratchet down into less cooperative equilibria in which the most peripheral become ostracized. Furthermore, population change that features rapid growth, high turnover, and enclave settlements can undermine cooperation. The insights from this article help to explain the trajectory of cooperation in the mining towns of the Wild West in which high levels of cooperation deteriorated as the population surged, and help to make sense of why only certain nonwhite settlers were targets of hostility and racism.

Creating an Efficient Culture of Cooperation

Throughout human history, informal sanctions by peers were ubiquitous and played a key role in the enforcement of social norms and the provision of public goods. However, a considerable body of evidence suggests that informal peer sanctions cause large collateral damage and efficiency costs. This raises the question whether peer sanctioning systems exist that avoid these costs and whether other, more centralized, punishment systems are superior and will be preferred by the people. Here, we show that efficient peer sanctioning without much need for costly punishment emerges quickly if we introduce two relevant features of social life into the experiment: (i) subjects can migrate across groups with different sanctioning institutions and (ii) they have the chance to achieve consensus about normatively appropriate behavior. We also show that subjects universally reject peer sanctioning without a norm consensus opportunity – an institution that has hitherto dominated research in this field – in favor of our efficient peer sanctioning institution or an equally efficient institution where they delegate the power to sanction to an elected judge. Migration opportunities and normative consensus building are key to the quick emergence of an efficient culture of universal cooperation because the more prosocial subjects populate the two efficient institutions first, elect prosocial judges (if institutionally possible), and immediately establish a social norm of high cooperation. This norm appears to guide subjects' cooperation and punishment choices, including the virtually complete removal of antisocial punishment when judges make the sanctioning decision.

Inequality, social sanctions and cooperation within South African fishing communities

We explore the effect of income inequality and social attitudes on cooperation and sanctioning in nine South African fishing communities, where allocation of fishing rights via quota and permits have been unequal and controversial. We use a linear public goods experiment design with heterogeneous endowments and peer sanctioning. In the Punishment treatment, aggregate contributions towards the public good are significantly higher amongst unequal groups, with low endowment players contributing the greatest endowment share. Sanctioning is significantly lower in unequal groups but demand for punishment is similar, irrespective of differences in relative costs. Free-riding drives punishment, but retaliation is another important motivator (specifically in unequal groups). In equal groups, antisocial punishment of cooperators is more common. The effect of real wealth and inequality on contributions and punishment is less salient, possibly due to real wealth not being discernible in the experimental context. Interestingly, social attitudes are important in explaining sanctioning behavior, indicating that distrust in formal institutions, and specifically in the top-down quota allocation process, may have a significant impact on behavioral outcomes and the effectiveness of community sanctioning mechanisms.

The evolution of cooperation by social exclusion

The exclusion of freeriders from common privileges or public acceptance is widely found in the real world. Current models on the evolution of cooperation with incentives mostly assume peer sanctioning, whereby a punisher imposes penalties on freeriders at a cost to itself. It is well known that such costly punishment has two substantial difficulties. First, a rare punishing cooperator barely subverts the asocial society of freeriders, and second, natural selection often eliminates punishing cooperators in the presence of non-punishing cooperators (namely, ‘second-order’ freeriders). We present a game-theoretical model of social exclusion in which a punishing cooperator can exclude freeriders from benefit sharing. We show that such social exclusion can overcome the above-mentioned difficulties even if it is costly and stochastic. The results do not require a genetic relationship, repeated interaction, reputation or group selection. Instead, only a limited number of freeriders are required to prevent the second-order freeriders from eroding the social immune system.

What's Oppositional Culture Got to Do with It? Moving beyond the Strong Version of the Acting White Hypothesis

Is the acting white hypothesis empirically viable? The strong version of this hypothesis—that African American students are negatively sanctioned by peers for academic success, while their similar white peers are not sanctioned—misses the possibility that some students preemptively pull back academic effort without having received sanctions. This article tests a weak version of the hypothesis—that some academically engaged African American students perceive the costs of peer sanctions to be sufficiently high to scale back overt academic engagement before receiving peer sanctions. The weak version predicts sufficiently high costs of sanctions in schools with racialized social norms about academic engagement. The author uses multilevel modeling to test strong and weak versions of the hypothesis on a nationally representative sample of African American and white students. While the results do not support the strong version of the acting white hypothesis, they point to a mild form of the weak version of the hypothesis.

Sanctioning by Institution, Skepticism of Punisher and the Evolution of Cooperation

This article aims to clarify the case and the mechanism where sanction or punishment by institution can deliver the evolution of cooperation. Compared to peer sanctioning, institutional sanctioning may be sensitive to players' attitude toward players who do not pre-commit punishment. Departed from former studies based on the punisher who always acts cooperatively, we assume that the punishing player is skeptical in that she cooperates in proportion to how many same types join in her team. Relying on stochastic adaptive dynamics, we show that institutional sanctioning coupled with skeptical punisher can make cooperation evolve for the case where peer sanctioning may not.

Guarded Borders: Adolescent Interracial Romance and Peer Trouble at School

Assimilation theorists have long viewed inter-group romantic partnerships as indicators of racial equality. Although the past half-century has witnessed the erosion of anti-miscegenation laws and subsequent increases in the frequency of interracial marriages, these unions remain relatively infrequent. Low intermarriage rates may be partially explained by the informal sanctions leveled at young interracial romances. This study tests whether adolescents who interracially date are at greater risks of peer difficulties than intra-racially dating youth. Results demonstrate a positive relationship between adolescent interracial dating and peer trouble at school. As hypothesized from ethnographic research and theories of inter-group relations, results suggest that interracial romances activate peer sanctions and that these reactions are strongest when romances involve black students.

Team Incentives under Relative Performance Evaluation

This paper examines the optimal provision of incentives in the repeated setting with many agents under the restriction that only relative performance evaluation is feasible for contracting. We show that the optimal contract in the repeated setting may take a different form than that in the static setting. In the repeated setting, it may be optimal for the principal to arbitrarily divide the agents into teams and compensate them based on team ranking, as it allows the principal to motivate the agents through peer sanctions. The situation draws a clear contrast to the static setting where such a strategy is never optimal. The result indicates that the concept of team plays an important role in the repeated setting even when performances can only be evaluated in relative terms.

Impact of communication and information on a complex heterogeneous closed water catchment environment

This paper uses an experimental design that combines the use of an environmental levy with community involvement in the formation of group agreements and strategies to explore the impact of information and communication on water use in a complex heterogeneous environment. Participants in the experiments acted as farmers faced with monthly water demands, uncertain rainfall, possible crop loss, and the possibility of trading in water entitlements. The treatments included (1) no information on environmental consequences of extraction, (2) the provision of monthly aggregate environmental information, (3) the provision of monthly aggregate extraction information and a forum for discussion, and (4) the public provision of individual extraction information and a forum for discussion giving rise to potential verbal peer sanctions. To account for the impact of trade, the treatments were blocked into three market types: (1) no trade, (2) open call auctions, and (3) closed call auctions. The cost to the community of altering the natural flow regime to meet extractive demand was socialized through the imposition of an environmental levy equally imposed on all players.

Joint Liability and Peer Monitoring under Group Lending

Abstract This paper studies an incentive rationale for the use of group lending as a method of financing liquidity-constrained entrepreneurs. The joint liability feature associated with group lending lowers the liquidity risk of default but creates a free-riding problem. In the static setting, the free-riding problem dominates the liquidity risk effect under a plausible condition, thus making group lending unattractive. When the projects are repeated infinitely many times, however, the joint liability feature provides the group members with a credible means of exercising peer sanction, which can make the group lending attractive, relative to individual lending.

The Impact of a Localized Antidrug Media Campaign on Targeted Variables Associated with Adolescent Drug Use

The authors report a study designed to determine whether antidrug campaigns that have been localized can affect variables associated with adolescent drug use. An experiment was conducted with sets of matched communities with populations between 5000 and 30,000 distributed throughout the United States. Seventh- through twelfth-grade students in experimental communities were exposed to a year-long media campaign followed by a survey. The targeted variables were perceived influence of media messages on “favorability” toward substance use and drug-related intentions, perceived harm of substance use, parental sanctions against substance use, parent-child communication about substance use, peer encouragement to use substances, and peer sanctions against substance use. Recall of the media campaign was low. However, adolescents with low and moderate levels of drug use who recalled individual campaign flights showed beneficial effects on targeted variables in comparison with students who did not recall the campaigns and control students who were not exposed to the campaigns. The implications of the findings for further research and public policy are discussed.