Punishment as a Mechanism to Maintain Bilateral Cooperation: A Social Behavior Experiment

By Liao, Yuling; Hong, Kairong et al. | Social Behavior and Personality: an international journal, October 20, 2014 | Go to article overview

Punishment as a Mechanism to Maintain Bilateral Cooperation: A Social Behavior Experiment


Liao, Yuling, Hong, Kairong, Zhang, Liang, Social Behavior and Personality: an international journal


We designed 3 social behavior experiments involving compensation for real estate expropriation. We recruited 88 students at a university in China as our participants, and investigated the impact of third-party punishment on bilateral cooperation in a laboratory setting. The results showed the heterogeneity of human behavior in the different experiment types. In addition, results showed that the potential impact of punishment became more powerful by adding a third party. Finally, a third party had low punishment costs and a significantly higher probability of actually imposing punishment than did a second party. Results showed that, compared with second-party punishment, third-party punishment is more conducive to the maintenance of bilateral cooperation.

Keywords: bilateral cooperation, third-party punishment, second-party punishment, real estate expropriation, compensation.

Compensation for real estate expropriation in China, involving both compensation for expropriation of housing on state-owned land and compensation for expropriation of rural collective land, has formed a complete system (Hong, 2012). However, because of accelerating urbanization in China, disputes over compensation for real estate expropriation are becoming difficult social conflicts. If these conflicts are to be resolved, it is necessary to facilitate coordination and cooperation among the interested parties that include the relocating household, the developer, and third parties (Mullan, Grosjean, & Kontoleon, 2011).

In society, people rely on social mechanisms to maintain both cooperation between two parties (bilateral cooperation) and group cooperation (Cabon-Dhersin & Etchart-Vincent, 2012; Cheung, 2014). Different theories have been developed to explain this process, and these have implicated social mechanisms, such as reputation, group selection, and punishment (Balafoutas, Grechenig, & Nikiforakis, 2014; Chavez & Bicchieri, 2013), as being conducive to enforce social norms. Increasingly, scholars have begun to pay attention to the role of punishment as a mechanism for bringing about human cooperation.

In this study, we used a real estate expropriation compensation situation as a background to laboratory experiments combining second- and third-party punishment mechanisms aimed at achieving bilateral cooperation. We investigated the rejection behavior of the relocating household, that is, the second-party punishment. In addition, we observed the impact of intervention by a third party (third-party punishment), that is, the ability of a third party to adjust the distribution of income between the relocating household and the developer.

Literature Review and Hypotheses Development

People devise a mechanism to punish individuals who violate the social norm of cooperation, but this process does not take place in the unilateral dominance that applies in the dictator game. In this game, there are two players (the dictator and the receiver) and the receiver can only passively accept what the dictator allocates, so that this unilateral dictatorship entails many difficulties for the receiver in obtaining a fair distribution of benefits (Andreoni & Miller, 2002; Croson & Gneezy, 2009; Engel, 2011; Oxoby & Spraggon, 2008). In real life people can use negative sanctions (e.g., the second- and third-party punishment) to break this deadlock. For example, the second party (the responder) can reject the distribution benefits that are proposed by the other party to the transaction (negative sanction).

Empirical researchers have reported finding evidence of negative sanctions (e.g., punishment), focusing on two aspects: (a) norm-governed interactions by the parties directly involved in the distribution of benefits. This means that the second party imposes a direct punishment, and (b) an uninvolved third party imposes a punishment for the unfair distribution (Bicchieri, Xiao, & Muldoon, 2011; Fehr & Fischbacher, 2004; Kurzban, DeScioli, & O'Brien, 2007). …

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