Violator Avoidance Activities and Self-Reporting in Optimal Law Enforcement

Laws often encourage violators to self-report their behavior.This article studies self-reporting enforcement regimes whenviolators can engage in "avoidance" activities—activitieswhich lower an offender's risk of apprehension and punishment.Avoidance activities impart two advantages to self-reportingenforcement regimes over and above advantages identified inprior work. First, self-reporters do not engage in the costlyavoidance activities that they would otherwise undertake. Second,by avoiding avoidance, self-reporting can sometimes permit thegovernment to deter offenses with less enforcement effort.     

The evolution of sanctioning institutions: an experimental approach to the social contract

A vast amount of empirical and theoretical research on public good games indicates that the threat of punishment can curb free-riding in human groups engaged in joint enterprises. Since punishment is often costly, however, this raises an issue of second-order free-riding: indeed, the sanctioning system itself is a common good which can be exploited. Most investigations, so far, considered peer punishment: players could impose fines on those who exploited them, at a cost to themselves. Only a minority considered so-called pool punishment. In this scenario, players contribute to a punishment pool before engaging in the joint enterprise, and without knowing who the free-riders will be. Theoretical investigations (Sigmund et al., Nature 466:861–863, 2010) have shown that peer punishment is more efficient, but pool punishment more stable. Social learning, i.e., the preferential imitation of successful strategies, should lead to pool punishment if sanctions are also imposed on second-order free-riders, but to peer punishment if they are not. Here we describe an economic experiment (the Mutual Aid game) which tests this prediction. We find that pool punishment only emerges if second-order free riders are punished, but that peer punishment is more stable than expected. Basically, our experiment shows that social learning can lead to a spontaneously emerging social contract, based on a sanctioning institution to overcome the free rider problem.     

THE IMPACT OF LOW‐PRIORITY LAWS ON CRIMINAL ACTIVITY: EVIDENCE FROM CALIFORNIA

We examine the impact of low‐priority initiatives on criminal activity. Low‐priority initiatives mandate that minor marijuana possession offenses be the lowest enforcement priority for police. Localities pass these laws because they believe if officers devote fewer resources toward minor marijuana crimes, more resources will be available to deter more serious crimes. Using data from California, we find that jurisdictions that adopted low‐priority laws experienced a reduction in arrests for misdemeanor marijuana offenses. However, we do not find evidence of a consistent effect of enacting a low‐priority initiative on the crime or clearance rate of other felonies. (JEL H1, H4, K4)     

The limit of oversight in policing: Evidence from the 2001 Cincinnati riot

Oversight in policing involves investigating officers for complaints against them and punishing them if found guilty. Officers commit errors in policing and, since reducing the error rate is costly, they cut down policing to avoid complaints. This paper tests the hypothesis that oversight reduces policing by exploiting a quasi-experiment: In April 2001, a riot erupted in Cincinnati after a white officer shot dead an unarmed African-American adolescent; the sharply increased media attention, a Justice Department investigation, together with a “racial profiling” lawsuit, exogenously raised the expected penalty of an officer's errors. Compared with the period from January 1999 to March 2001, arrests during the remaining months of 2001 fell substantially. The decline was more significant for offenses where the error rate was higher. Communities with a greater percentage of African-Americans experienced greater arrest reductions. Felony crime surged during the same period.     

Renegotiation in repeated games

In repeated games, subgame-perfect equilibria involving threats of punishment may be implausible if punishing one player hurts the other(s). If players can renegotiate after a defection, such a punishment may not be carried out. We explore a solution concept that recognizes this fact, and show that in many games the prospect of renegotiation strictly limits the cooperative outcomes that can be sustained. We characterize those outcomes in general, and in the prisoner's dilemma, Cournot and Bertrand duopolies, and an advertising game in particular.     

Performance Standards and Incentive Pay in Agency Contracts

When the presence of limited liability restricts a principal from imposing monetary fines on an agent in case of poor performance, the principal might use other kinds of punishment threats to deter the agent from shirking. We show that under the optimal contract in this case, the principal sets a performance standard and punishes the agent if the standard is not met, but rewards the agent on a profit-sharing basis if the standard is significantly exceeded. The optimal choice of performance standards for such contracts is discussed. It is shown that punishment threats, although inefficient, often help the principal to discipline the agent.
JEL classification : D 82     

Unobserved punishment supports cooperation

Costly punishment can facilitate cooperation in public-goods games, as human subjects will incur costs to punish non-cooperators even in settings where it is unlikely that they will face the same opponents again. Understanding when and why it occurs is important both for the design of economic institutions and for modeling the evolution of cooperation. Our experiment shows that subjects will engage in costly punishment even when it will not be observed until the end of the session, which supports the view that agents enjoy punishment. Moreover, players continue to cooperate when punishment is unobserved, perhaps because they (correctly) anticipate that shirkers will be punished: Fear of punishment can be as effective at promoting contributions as punishment itself.     

Crime and punishment again: The economic approach with a psychological twist

Akerlof and Dickens (1982) suggested that in a model of criminal behavior which considered the effects of cognitive dissonance, increasing the severity of punishment could increase the crime rate. This paper demonstrates that that conjecture was correct. With cognitive dissonance, people may have to rationalize not committing crimes under normal circumstances if punishment is not severe. The rationalization may lead them to underestimate the expected utility of committing crimes when opportunities present themselves. If punishment is severe, then rationalization may not be necessary and people may be more likely to commit crimes when opportunities arise.     

Asymmetric Punishment as an Instrument of Corruption Control

The control of bribery is a policy objective in many developing countries. It has been argued that asymmetric punishments could reduce bribery by incentivizing whistle‐blowing. This paper investigates the role played by asymmetric punishment in a setting where bribe size is determined by Nash bargaining, detection is costly, and detection rates are set endogenously. First, if whistle‐blowing is infeasible, the symmetry properties of punishment are irrelevant to bribery deterrence but not to bribe size. Bribery disappears if expected penalties are sufficiently high; otherwise, bribe sizes rise as expected penalties rise. Second, when the bribe‐giver may whistle‐blow, a switch from symmetric to asymmetric punishment eliminates bribery only if whistle‐blowing is cheap and the stakes are low. When bribery persists, multiple bribe sizes could survive in equilibrium. The paper derives parameter values under which each of these outcomes occurs, and discusses implications for welfare and the design of policy.     

The power of apology

How should firms react to customer complaints after an unsatisfactory purchase? In a field experiment, we test the effect of different reactions and find that a cheap-talk apology yields significantly better outcomes for the firm than offering a monetary compensation.     

A fault confessed is half redressed—Confessions and punishment

Confessions after failures are socially desirable. However, confessions also bear the risk of punishment. In a laboratory experiment I examine how confessions work. I analyze whether the willingness to punish harmful failures depends on how the harmed party has learned about the outcome. The harmed party can learn about the outcome via random detection or self-report by the performer. There are two major findings: first, confessions are a powerful instrument: punishment for confessed failures is less likely than for randomly detected failures. Second, confessions are much more likely to occur if there is no punishment.     

On punishment and well-being

The existence of punishment opportunities has been shown to cause efficiency in some public goods experiments to increase considerably. In this paper we ask whether punishment also has a downside in terms of process dissatisfaction. We conduct an experiment to study the conjecture that an environment with strong punishment possibilities may lead to higher material payoffs but lower subjective well-being, in comparison with weaker punishment or no punishment possibilities at all. The more general motivation for our study stems from the notion that people’s subjective well-being may be affected by the institutional environment they find themselves in. Our findings show that harsher punishment possibilities lead to significantly higher well-being, controlling for earnings and other relevant variables. These results complement the evidence on the neural basis of altruistic punishment reported in De Quervain et al. (2004).     

Relational Political Contribution under Common Agency

Motivated by commitment problems of contracts in lobbying, this paper studies a model of a repeated common agency where monetary transfers must be voluntary. First, we show that the optimal punishment strategy for a principal takes a two‐phase scheme, which is similar to the punishment characterized by Goldlücke and Kranz. Second, we investigate whether an outcome of standard menu auctions with binding contracts can be supported by implicit contracts. We define the environment to be more preference‐diverse if an efficient decision is less attractive to each principal. We show that the discount factor must be high to support the outcome of the standard menu auction if the environment is preference‐diversified.     

Group Dynamics of Corruption in Public Organizations

Abstract

When there are two groups of officials in a public organization, we show that depending on the groups’ behavior – collusive or competitive – increasing the level of monitoring and punishment may have different impacts on corruption. If the two groups of public officials had been demonstrating collusive behavior, increased monitoring or punishment reduces both the level of corrupt activities and the corrupt officials’ bribe revenues. However, if the groups had not been colluding, increased monitoring reduces the level of corruption, but increases the corruption revenues collected. Only after reaching the optimum level of monitoring, is this result reversed.     

The effects of endowment size and strategy method on third party punishment

Numerous experiments have shown that people often engage in third-party punishment (3PP) of selfish behavior. This evidence has been used to argue that people respond to selfishness with anger, and get utility from punishing those who mistreat others. Elements of the standard 3PP experimental design, however, allow alternative explanations: it has been argued that 3PP could be motivated by envy (as selfish dictators earn high payoffs), or could be influenced by the use of the strategy method (which is known to influence second-party punishment). Here we test these alternatives by varying the third party’s endowment and the use of the strategy method, and measuring punishment. We find that while third parties do report more envy when they have lower endowments, neither manipulation significantly affects punishment. We also show that punishment is associated with ratings of anger but not of envy. Thus, our results suggest that 3PP is not an artifact of self-focused envy or use of the strategy method. Instead, our findings are consistent with the hypothesis that 3PP is motivated by anger.     

New insights into conditional cooperation and punishment from a strategy method experiment

This paper introduces new experimental designs to examine how conditional cooperation and punishment behaviours respond to the full range of variation in the contributions of others. It is shown that contributions become significantly more selfish-biased as others contribute more unequally, while punishment increases both with decreasing contributions by the target player and increasing contributions by a third player. Low contributors who punish antisocially do not direct their punishment specifically toward high contributors, while their beliefs indicate that they expect to themselves be punished.     

Strong reciprocity and team production: Theory and evidence

Punishment of shirkers is often an effective means of attenuating incentive problems and sustaining coordination in work teams. Explanations of the motivation to punish generally rely either on small group size or on a Folk theorem that requires coordinated punishment and, hence, highly accurate information concerning the behavior of each player. We provide a model of team production in which the punishment of shirkers depends on strong reciprocity: the willingness of some team members to contribute altruistically to a joint project and also to bear costs in order to discipline fellow members who do not contribute. This alternative does not require small group size, complex coordinated punishing activities, or implausible informational assumptions. An experimental public goods game provides evidence for the behavioral relevance of strong reciprocity and how it differs from unconditional altruism.     

The limits of self-governance when cooperators get punished: Experimental evidence from urban and rural Russia

We report evidence from public goods experiments with and without punishment which we conducted in Russia with 566 urban and rural participants of young and mature age cohorts. Russia is interesting for studying voluntary cooperation because of its long history of collectivism, and a huge urban–rural gap. In contrast to previous experiments we find no cooperation-enhancing effect of punishment. An important reason is that there is punishment of contributors in all four subject pools. Thus, punishment can also undermine the scope for self-governance in the sense of high levels of voluntary cooperation that are sustained by sanctioning free riders only.     

Cooperation Norms in Multiple‐Stage Punishment

We analyze the interplay between cooperation norms and people’s punishment behavior in a social‐dilemma game with multiple punishment stages. By combining multiple punishment stages with self‐contained episodes of interaction, we are able to disentangle the effects of retaliation and norm‐related punishment. An additional treatment provides information on the norms bystanders use in judging punishment actions. Partly confirming previous findings, punishment behavior and bystanders’ opinions are guided by an absolute norm. This norm is consistent over decisions and punishment stages and requires full contributions. In the first punishment stage, our results suggest a higher personal involvement of punishers, leading to a nonlinearity defined by the punishers’ contribution. In later punishment stages, the personal‐involvement effect vanishes and retaliation kicks in. Bystanders generally apply the same criteria as punishers in all stages.     

Strategies of cooperation and punishment among students and clerical workers

We study the individual behavior of students and workers in an experiment where they repeatedly face the same cooperative task. The data show that clerical workers differ from college students in overall cooperation rates, strategy adoption and use of punishment opportunities. Students cooperate more than workers. Cooperation increases in both subject pools when a personal punishment option is available. Students are less likely than workers to adopt strategies of unconditional defection, and more likely to select strategies of conditional cooperation. Finally, students are more likely than workers to sanction uncooperative behavior by adopting decentralized punishment, and also personal punishment when available.