A theory of sanctions: Objectives, degree of heterogeneity, and growth potential matter for optimal use of carrot or stick

No SDES-2014-13, Working Papers from Kochi University of Technology, School of Economics and Management

Abstract: While most economic literature on punishment and reward follows an experimental study on a symmetric version of a public goods game, we theoretically study sanction institutions by focusing on an asymmetric public goods game. Using a model for a private-value all-pay auction, we find that (1) the reward (punishment) is more effective to motivate people with greater (less) ability than median ability, (2) to improve the total effort, the reward (punishment) is better for more (less) heterogeneous people, and (3) reward tends to be optimal in the long run under the dynamics of group diversity change caused by enforced sanctions.

Pages: 23 pages
Date: 2014-10, Revised 2014-10
New Economics Papers: this item is included in nep-exp and nep-hrm
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Published in SDE Series, October 2014, pages 1-23

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Persistent link: https://EconPapers.repec.org/RePEc:kch:wpaper:sdes-2014-13

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