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Can Sanctions Induce Pessimism? An Experiment

Author

Listed:
  • Roberto Galbiati
  • Karl Schlag
  • Joël van der Weele
Abstract
We experimentally investigate the effects of sanctions when there are multiple equilibria. Two subjects play a two-period minimum effort game in the presence of third player (principal). The principal benefits from coordination on higher effort, and is the only one informed of previous choices choices. We contrast introducing an exogenously imposed sanction in the second round to the case where the principal is allowed to decide whether or not, at a small cost, to impose a sanction. We find that exogenously introduced sanctions are effective in inducing optimistic beliefs about others and help coordination on more efficient equilibria. On the other hand, endogenously introduced sanctions negatively influence beliefs about the effort of the other player. The results supports the idea that sanctions have an expressive dimension which can undermine their effectiveness by discouraging optimistic players.

Suggested Citation

  • Roberto Galbiati & Karl Schlag & Joël van der Weele, 2009. "Can Sanctions Induce Pessimism? An Experiment," Labsi Experimental Economics Laboratory University of Siena 024, University of Siena.
    • Handle: RePEc:usi:labsit:024
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    References listed on IDEAS

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    Cited by:

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    2. Karl Schlag & Joël van der Weele, 2009. "Efficient interval scoring rules," Economics Working Papers 1176, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Andrei Bremzen & Elena Khokhlova & Anton Suvorov & Jeroen van de Ven, 2015. "Bad News: An Experimental Study on the Informational Effects Of Rewards," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 55-70, March.
    4. Fabrice Le Lec & Astrid Matthey & Ondrej Rydval, 2012. "Punishment Fosters Efficiency in the Minimum Effort Coordination Game," Jena Economics Research Papers 2012-030, Friedrich-Schiller-University Jena.
    5. Xiao, Erte, 2013. "Profit-seeking punishment corrupts norm obedience," Games and Economic Behavior, Elsevier, vol. 77(1), pages 321-344.

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    More about this item

    Keywords

    Sanctions; beliefs; expressive law; deterrence; coordination; minimum effort game;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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