Third-party punishment

Third-party punishment, also known as altruistic punishment, refers to a phenomenon in which a person or party is punished for violation of social norms by an outside observer who is not directly affected by the violation. It can be argued that third-party punishments are the essence of social norms, as they are evolutionary stable unlike second-party punishments. It has also been shown that third-party punishments are exhibited in all examined populations, though the magnitude of the punishments varies greatly, and that costly punishment co-varies with altruistic behavior. Differences between within-group and inter-group altruistic punishments have also been observed.

Some of the common experiments in experimental economics concerning the study of second-party punishments with respect to distribution and cooperation norms have been dictator games and prisoner's dilemma games. These games can also be effectively used in the study of third-party punishments with respect to distribution and cooperation norms with some modifications.

Concerning third-party dictator game (TP-DG), the game was modified to include a third person with a punishment option between the dictator and the recipient. The dictator was given an endowment of 100, of which he could choose to share any portion with the recipient. The third person observer was also given an endowment of 50, of which he could choose to spend in order to punish the dictator. If self-interest was the driving force for the decision making, then the dictator would choose to donate none of his endowment, and the third party observer would choose to spend none of his endowment punishing the dictator. However, roughly 60% of the third party observers chose to punish dictators who donated less than half their endowment.

In a variation of the TP-DG, the third party observer could choose to spend part of the endowment to punish the dictator or could spend part of the endowment to compensate the recipient. About 40% of the third party observers chose to do both, while 32% chose to compensate the recipient and only about 6% opted to punish only. This indicates that compensation is preferred over punishment in the TP-DG when an offer is perceived as unfair. This suggests that third-party punishment may be motivated by a desire to both provide justice for those who have been wronged and to reprimand those who violate expected social norms.

Concerning third-party prisoner's dilemma (TP-PD), the game was modified so that in addition to two players who would choose to either cooperate or defect, a third party observer could choose to punish the players. The payoffs of the game were such that the players would be best off if they defected; however, if both players chose to defect, their payoff would be less than if they had cooperated. The observer could then choose to spend from his endowment to punish the defectors who chose to put self-interest ahead of cooperation. From previous theories, it can be concluded that subjects are willing to cooperate if the probability that others will also do so is sufficiently large. Once again, if self-interest was the decision maker for these players, neither would choose to cooperate, and the observer would also choose to keep his full endowment and not issue any punishments. However, about 45.8% of observers chose to punish the defector when he is paired with a cooperator, and 20.8% chose to punish both players if they had both defected. It's important to note that the magnitude of punishment was much larger when one defected.

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Wikipedia