Do You Reward And Punish In The Way You Think Others Expect You To?

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Executive Summary

This paper addresses three questions: When deciding on whether to reward or punish someone, how does how you think others expect you to behave affect your decision? Does it depend upon whether others expect you to reward them vs. punish them? What is the interpretation of such a causal effect? The authors investigate these questions using a modification of the lost wallet trust game that permits punishment. Like previous studies, they collect data on what second movers think that first-movers expect them to do by directly eliciting the second-movers' expectations.

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