The effects of punishment in the public goods game

Imagine that you have to work on a group essay with three other students. When everyone puts the maximum of effort in this essay, you will get the optimum result. But one of your teammates decided to work less hard or does not work on it at all. In this case you can decide to report his behaviour to your teacher, who will consequently decide to give this student a lower mark. This kind of punishment might encourage more co-operation in the next group essay. The situation described above is an example of the public good game where punishment is applied. In many real life situations people have to cooperate in order to increase efficiency and successfully reach a target. Other examples are sport teams, firms where people have to work together and even daily family situations. Several research on the VCM, which we will discuss in this paper, shows that, in contradiction to the classical theory, that players in the public goods game are willing to cooperate . For example, Henrich (2001) in a study over 15 societies, shows that public good game offers were strictly positive and often substantially in excess of the expected income maximizing offer of zero contribution. Prior research also showed that the introduction of a punishment option in the public goods game leads to more cooperative behaviour of subjects. This leaves us with the following main question to answer: What are the effects of punishment in the public goods game? First we will explain some central concepts that need to be clear and straight in order to understand the rest of this paper. In the second part of this paper we will look at the factors that might cause cooperation in the public goods game when punishment is not introduced yet. We will look at altruistic behaviour and make a distinguishing between reciprocity and conformity. In the third part we will concentrate more on the positive results of punishment on cooperation published in prior literature. In the last part, we will mention some negative effects of punishment in the public goods game.