Abstract
To analyze the effectiveness of punishment in inducing regulatory compliance, we modify a standard public goods experiment to include a financial penalty for free riding. The design allows us to vary both punishment probability and severity. We introduce the punishment mechanism in both a one-time and a repeated treatment and find that compliance (contributing to the public good) is increasing in expected punishment cost in both treatments. We also find that punishment severity has a larger effect on behavior than punishment probability. In the repeated treatment, we find that past punishment has a negative rather than positive effect on compliance.
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Anderson, L.R., Stafford, S.L. Punishment in a Regulatory Setting: Experimental Evidence from the VCM. Journal of Regulatory Economics 24, 91–110 (2003). https://doi.org/10.1023/A:1023952115422
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DOI: https://doi.org/10.1023/A:1023952115422