If cooperation is likely punish mildly: Insights from economic experiments based on the snowdrift game

Abstract

Punishment may deter antisocial behavior. Yet to punish is costly, and the costs often do not offset the gains that are due to elevated levels of cooperation. However, the effectiveness of punishment depends not only on how costly it is, but also on the circumstances defining the social dilemma. Using the snowdrift game as the basis, we have conducted a series of economic experiments to determine whether severe punishment is more effective than mild punishment. We have observed that severe punishment is not necessarily more effective, even if the cost of punishment is identical in both cases. The benefits of severe punishment become evident only under extremely adverse conditions, when to cooperate is highly improbable in the absence of sanctions. If cooperation is likely, mild punishment is not less effective and leads to higher average payoffs, and is thus the much preferred alternative. Presented results suggest that the positive effects of punishment stem not only from imposed fines, but may also have a psychological background. Small fines can do wonders in motivating us to chose cooperation over defection, but without the paralyzing effect that may be brought about by large fines. The later should be utilized only when absolutely necessary.