A comparative statics analysis of punishment in public-good experiments

This paper provides a comparative-statics analysis of punishment in public-good experiments. We vary the effectiveness of punishment, that is, the factor by which punishment reduces the punished player's income. The data show that contributions increase monotonically in punishment effectiveness. High effectiveness leads to near complete cooperation and welfare improvements. Below a certain threshold, however, punishment cannot prevent the decay of cooperation. In these cases, punishment opportunities reduce welfare. The results suggest that the experimenter's choice of the punishment effectiveness is of great importance for the experimental outcome.