Endowment heterogeneity and peer punishment in a public good experiment: Cooperation and normative conflict

• Paper investigates the effectiveness of peer punishment across payoff equivalent public good conditions.
• Endowments are either homogeneous or heterogeneous.
• Contributions and earnings are significantly lower in the heterogeneous endowment condition.
• Peer punishment is less effective when endowments are heterogeneous.

The provision of public goods motivates the creation of institutions designed to compel individuals to cooperate. Peer punishment mechanisms have garnered particular attention and suggest that groups are able to self-govern. Research suggests that the effectiveness of peer punishment depends on a group’s capacity to establish and enforce contribution norms. This paper investigates the effectiveness of such institutions when normative conflict makes contribution norms ambiguous. In an interior solution public good experiment, endowment heterogeneity and peer punishment are interacted. Results suggest that peer punishment induces greater contributions when endowments are homogeneous but does not increase contributions when endowments are heterogeneous. Across the payoff equivalent endowment conditions with the opportunity to punish, contributions and earnings are significantly lower when endowments are heterogeneous. This research suggests that the capacity of groups to self-govern is limited when normative conflict makes contribution norms ambiguous.