How do higher-order punishment institutions shape cooperation and norm-enforcement?

Abstract

We explore, both theoretically and through a laboratory experiment, the impact of different forms of higher-order punishment on third-party behavior and cooperation levels within a public goods game. This investigation may shed light on how norms influence national governments, as monitored by international organizations or disciplined by electoral competition, and how these norms are subsequently enforced on and followed by domestic agents, e.g., businesses. Specifically, we compare two main treatments that represent the effects of competitive elections and external monitors in a stylized form. These treatments are contrasted with a control condition that lacks an additional layer of norm enforcement. While both higher-order punishment institutions enhance cooperation compared to the control, our findings reveal differences between the two scenarios: Evaluation of the third party by an uninvolved agent leads to heightened punishment and reduced free-riding, whereas competition between two third-party candidates results in more strategic and selective punitive actions.