Threat of Punishment Is Key to Cooperation

From Scientific American:Threat

Humans cooperate on all sorts of issues and tasks, but every so often a member of the group fails to pull his weight. If such free riding is allowed to proliferate, cooperation itself can break down. A new study suggests that the threat of penalty is the key to successful cooperation.

Bettina Rockenbach of the University of Erfurt in Germany and her colleagues set up an economic test of 84 students self-selected into two groups–one in which punishment was permitted and one in which it was not. In each of 30 rounds participants chose which group to join; how much of their own money to contribute to a collective pool to be increased by a set amount and shared; and then, if they were in the punishing group, whether to punish or reward their members for their contributions. At the end of each round, all the participants saw the anonymous “winnings” of their peers in both groups.

At first, two thirds of the participants chose membership in the nonpunishing group and contributed little of their money to the collective pool.

But it also led to a nearly complete defection of all the participants to the punishing group. Although it cost money to penalize free riders, the threat of punishment enforced higher overall contributions and therefore higher overall payments to individual players.

More here.