Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/234849 
Year of Publication: 
2020
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 44-2020
Publisher: 
Philipps-University Marburg, School of Business and Economics, Marburg
Abstract: 
We use an experiment to test the hypothesis that groups consisting of like-minded cooperators are able to cooperate irrespective of punishment and therefore have a lower demand for a costly punishment institution than groups of like-minded free riders, who are unable to cooperate without punishment. We also predict that the difference in the demand for punishment is particularly large when members know about the composition of their group. The experimental results confirm these hypotheses. However, the information about the composition of the group turns out to be even more important than we expected. It helps cooperative groups to avoid wasting resources for an unneeded punishment institution. In uncooperative groups, it helps members to recognize the need for punishment early on and not to follow an uncooperative path that produces a persistently competitive attitude. These findings highlight the role of group composition and information for institution formation and that lessons learned by one group cannot be readily transferred to other groups.
Subjects: 
Institution formation
public goods game
cooperation
punishment
controlled group formation
JEL: 
C91
H41
D23
C72
Document Type: 
Working Paper

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