Cracker Barrel on Regulating Responsibility

Business and the Environment

Free riders can’t always take it easy

Ernst Fehr, Simon Gächter and others study altruistic punishment and conditional cooperation between strangers, perfect strangers and partners in repeated games and those that happen only once.

Fehr and Gächter have structured their research to find whether players will punish free riders even when it is against their material self-interest. When contributors were told that they could earn money only if everyone pitched in as well, people were likely to spend money to ensure that other people would be punished for not contributing. People act in their own self interest but use altruistic punishment as a means to get compliance from strangers, perfect strangers and partners.

What are the policy implications? What types of regulations follow this structure? How often to do we have to ‘repeat the game’ in environmental regulation for free riders to really feel the punishment enough to climb on board? Is there more opportunity for free-riding in sequential games – do different levels of compliance make sense? Are there some regulations that can push violators so far out of the game that their actions are ungovernable?

More from Fehr and Gächter studying the differences in free riding and punishment between strangers, perfect strangers and partners. http://www.altruists.org/f838
And, “altruistic punishment”: http://129.3.20.41/eps/mic/papers/0305/0305006.pdf
And, free riding will be pervasive in sequential games. People are “conditionally cooperative”: http://ideas.repec.org/p/zur/iewwpx/016.html

Originally posted: 2/26/10

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