Punishment with Uncertain Outcomesin the Prisoner’s Dilemma

This paper experimentally investigates whether risk-averseindividuals punish less if the outcome of punishment is uncertain thanwhen it is certain. Our design includes three treatments: Baseline inwhich the one-shot prisoner’s dilemma game is played; CertainPunishment in which the prisoner’s dilemma game is followed by apunishment stage allowing subjects to decrease the other player’s payoffby 2 Euros; and Uncertain Punishment in which subjects could decreasethe other player’s payoff with a 50% probability by 1 Euro and with a50% probability by 3 Euros. We find that in all cases the risk-aversesubjects are equally likely to cooperate in the prisoner’s dilemma andequally likely to punish in the second stage in either of the twopunishment treatments....