THE EFFECT OF REWARDS AND SANCTIONS IN PROVISION OF PUBLIC GOODS

Abstract

A growing number of field and experimental studies focus on the institutional arrangements by which individuals are able to solve collective action problems. Important in this research is the role of reciprocity and institutions that facilitate cooperation via opportunities for monitoring, sanctioning, and rewarding others. Sanctions represent a cost to both the participant imposing the sanction and the individual receiving the sanction. Rewards represent a zero‐sum transfer from participants giving to those receiving rewards. We contrast reward and sanction institutions in regard to their impact on cooperation and efficiency in the context of a public goods experiment . ( JEL C92)