Risk Aversion and Probabilistic Punishment




Short, Amanda

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This paper studies the intersection between risk aversion and willingness to punish in an experimental Voluntary Contributions Mechanism (VCM) game. The analysis focuses on the differences between high and low risk averse subjects and how they respond to varying uncertainties of proposed punishment being carried out. Both selfish and altruistic punishment will be studied in this context. I find that subjects are more willing to incur the cost to punish in a selfish setting than an altruistic one, and that there is a significant relationship between high risk aversion and probability of punishment. People that are more risk averse are willing to punish greater amounts only when there is greater certainty attached to the situation. I do not, however, find supporting evidence that high and low risk averse people act differently with respect to uncertain punishment itself.



Risk aversion., Punishment., Public goods game., Behavioral economics., Uncertainty.