Immaterial rewards and sanctions in a voluntary contribution experiment

In this paper, we compare the cause and effect of immaterial rewards and sanctions on cooperation in a voluntary contributions experiment. We find that both rewards and sanctions increase contributions only when subjects interact repeatedly, though rewards seem to be more effective than sanctions. Moreover, in contrast to sanctions, rewards do have an impact on future contributions. Although the direct effect is negative, there is a positive indirect effect that applies to subjects who contribute above (below) the group average in a partner (stranger) matching. From this we conclude that sanctions and rewards are mainly used as a communication channel to coordinate on a more efficient outcome. Nevertheless, subjects also seem to experience additional utility from receiving approval, whereas they are insensitive to disapprovals.