Luigi Luini on Public goods, inequality and punishment

Speaker:  Luigi Luini
  Monday, July 1, 2013 at 12:30 PM Aula E, Palazzo di Economia

 We study a three persons PGG with strong asymmetric randomly allocated endowments (two “rich” players and one “poor” player). We compare the difference in contribution levels when the subjects do not have the possibility of costly punishing to the situation in which they can punish each others. We observe (in a 25-period experiment) that the average contribution rate differs in games with punishment compared to games without punishment. The average contribution rate of both rich and poor subjects is higher in games with punishment: in the no punishment treatment it converges to the zero-contribution Nash equilibrium; in the punishment treatment punishment availability prevents the Nash equilibrium convergence but the equilibrium level is lower than Cournot equilibrium.

In games with punishment there is no significant difference between the punishment rate given by the poor and by the rich. However the punishment rate received by the rich is higher than that received by the poor, indicating that the rich tend to punish each other. Both types of individuals (rich and poor) tend to punish more severely when their own contribution is higher than group average level. However, the extent to which deviation from group average influences punishment behavior differs between rich and poor, both for punishment given and punishment received. Among the rich individuals, positive deviation from group average has a significantly larger influence on punishment behavior. While negative deviation from group average does not have a significant influence on poor individuals, it significantly affects rich individual’s punishment behaviour: in fact rich individuals who contribute less than group average tend to more severely punish other group members. Contrary to the punishment given to others, negative deviation of contribution from group average level has a significant and negative influence on punishment received. The less each individual contributes to the group average contribution, the more severe (s)he will be punished by other group members. Endowment difference affects the degree of influence by their contribution deviation. The poor individuals contributing less than group average are more severely punished by others than rich individuals. When separating positive deviation from group average contribution by endowments, the effect remains significant but becomes negative. For poor and rich individuals separately, the higher than group average they contribute to the public account, the less punishment they will receive. In particular, the degree of influence is higher on rich individuals than on poor individuals. 

Programme Director
Maria Vittoria Levati

Publication date
February 18, 2013