Narrow Results

Ostracism is one form of real-life punishment mechanism to penalize uncooperative individuals in many societies. This paper aims to test whether ostracism enhances cooperation in the public good experiment by allowing group members to expel others based on the majority voting rule. The study also employed the modified public good experiment to categorize the contributors. The results showed that introducing ostracism increases contribution level by about 45 percentage points on average. However, some participants punished other members, even they contributed less than others or so-called anti-social punishment, suggesting that a third-party punishment may be another solution to sustain cooperation.

Incentive institutions that reward cooperators and punish free-riders are often used to promote cooperation in public goods games. We show that for incentives of intermediate size, a sanctioning institution that punishes the worst players can sustain full cooperation and that a rewarding institution can promote cooperation only if lower contributors also have the chance to win the reward. Furthermore, if the incentive institution can provide both reward and punishment, then it should use reward as much as possible. The group welfare is maximized when the punishment is just barely larger than the minimum required to obtain the full contribution.