Recent public goods experiments have shown that free riding can be curtailed through mutual monitoring and sanctioning between members of a group. However, often we can not allow for punishment and exclude the possibility of counter-punishment occurring. We design a public goods experiment, where we allow for both punishment and counter-punishment. We find that in both partner and stranger treatments cooperation declines over time. The reason is that people are less willing to punish under the threat of counter-punishment. Participants squander their endowment in costly confrontations leading to a relative payoff loss, in comparison to a treatment without punishments.
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