NORM ENFORCEMENT: ANGER, INDIGNATION, OR RECIPROCITY?

The enforcement of social norms often requires that unaffected third parties sanction offenders. Given the renewed interest of economists in norms, the literature on third-party punishment is surprisingly thin. In this paper, we report the results of an experiment designed to replicate the anger-based punishment of directly affected second parties and evaluate two distinct explanations for third-party punishment: indignation and group reciprocity. We find evidence in favor of both, with the caveat that the incidence of indignation-driven sanctions is perhaps smaller than earlier studies have hinted. Furthermore, our results suggest that second parties use sanctions to promote conformism while third parties intervene primarily to promote efficiency.