infonet-economy

Under a great variety of legally relevant circumstances, people have to decide whether or not to cooperate when they face an incentive to defect. The law sometimes provides people with sanctioning mechanisms to enforce pro-social behavior. Experimental evidence on voluntary public goods provision shows that the option to punish others substantially improves cooperation, even if punishment is costly. However, these studies focus on situations where there is no uncertainty about the behavior of others. We investigate sanctions in a world with "reasonable doubt" about the contributions of others. Interestingly, people reveal a high willingness to punish even if their information about cooperation rates is highly inaccurate. If there is some nontrivial degree of noise, punishment (1) cannot establish cooperation high and (2) reduces welfare even below the level of a setting without punishment. Our findings suggest that sufficient information accuracy about others' behavior is crucial for the efficiency of sanction mechanisms. If a situation is characterized by low information accuracy, precluding sanctions, for example, through high standards of proof, is likely to be optimal