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Information-Sensitive Sanctioning Institutions – From Individual to Institutional Fitness

Abstract: Sanctions may play an important role for cooperation. However, what type of sanction is effective under which condition remains obscure. Most of the recent literature focuses on decentralized sanctions in a perfect information environment. Studies with competing institutions confirm that decentralized sanctions prevail. We show experimentally that the success of sanctioning institutions crucially depends on the information environment. Under perfect information, a large part of the population migrates to a decentralized sanctioning institution, even when compared to centralized sanctioning institutions with good authorities. As noise increase institutions with centralized sanctions or a complete restriction of (decentralized and centralized) sanctions attract large parts of the population. These findings shed a critical light on restrictions of decentralized sanctions under perfect information and emphasize imperfect information as a pivotal force for the emergence of centralized sanctions.