Rewards and Punishments as Selective Incentives

Abstract

Apex games place weak players in the formal equivalent of a multiperson prisoner's dilemma in which each weak player must choose between competing against the other weak players for the opportunity to coalesce with the strong player or cooperating with the other weak players to produce a jointly preferable outcome. Punishments, not rewards, are predicted to be effective for enforcing cooperation by the weak players. Fifty-four groups of four subjects each played the weak role in a five-person apex game with a confederate playing the apex (strong) role in a 3×3 design with factors of low, medium, and high levels of rewards and punishments available as incentives. As predicted, punishments but not rewards had a significant impact on increasing cooperation. Despite this effect, many groups experienced harmful effects of punishment availability that increased the risk of retaliatory spirals. It is concluded that a second-order dilemma may be seen in prisoner's dilemmas, since punishments are both necessary for enforcing cooperation and detrimental to that cooperation.