Wednesday, April 24, 2013
Aurelie Ouss and Alexander Peysakhovich (Harvard University and Harvard University - Program for Evolutionary Dynamics) have posted When Punishment Doesn't Pay: 'Cold Glow' and Decisions to Punish on SSRN. Here is the abstract:
Economic theories of punishment focus on determining the levels of punishment that will provide maximal social material payoffs. In calculating these levels, several parameters are important: total social costs, total social benefits and the probability that defectors are apprehended. However, often times social levels of punishment are determined by aggregates of individual decisions. Research in behavioral economics, psychology and neuroscience shows that individuals appear to treat punishment as a private good ("cold glow") and so individual decisions may be inappropriately responsive to the above parameters. This means that, depending on environment, aggregate punishment levels can be predictably above or below optimally deterring benchmarks and final social outcomes (e.g.. levels of cooperation and total social costs incurred) can be highly inefficient. We confirm these predictions in a series of experiments. Our research highlights the importance of understanding the psychology of punishment for understanding economically important outcomes and for designing social mechanisms.