published in: Games and Economic Behavior, 2007, 60 (1), 31-51
Because costly punishment is not credible, subgame perfection suggests that punishment will
not deter free riding, regardless of the size or structure of groups. However, experiments
show that people will punish free riders, even at considerable cost. To examine the
implications of agents who punish, we simulate an environment populated with behavioral
strategies seen in the lab and use the simulation to develop hypotheses about why group
size should matter when punishment is allowed. We test these hypotheses experimentally
and examine whether the effect of group size is purely due to the number of group members
or if information about other group members is what is important. We find that large groups
contribute at rates no lower than small groups because punishment does not fall appreciably
in large groups. However, hindrances to monitoring do reduce the provision of the public
good.
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