The demand for complete and incomplete punishment institutions to promote cooperation

We use an experiment to study the demand for complete and incomplete formal punishment institutions and their ability to promote cooperation. Complete punishment institutions are implemented by the whole group and bind everyone. Incomplete punishment institutions are implemented by a subgroup and bind only the members of this subgroup. We distinguish between strictly incomplete institutions, in which only one subgroup can bind itself while the remaining individuals are unbound, and potentially incomplete institutions, in which two subgroups can bind themselves independently and separately in different institutions, potentially binding everyone. Theoretically, the demand for such formal punishment institutions should depend only on the benefit of cooperation within the group or subgroup bound by the institution. However, we hypothesize and the experimental results confirm that, in the case of incomplete punishment institutions, the benefit of cooperation has a much smaller impact on the demand than in complete punishment institutions. Instead, individuals’ cooperativeness and coordination between the subgroups become important determinants.