arno Riedl's Homepage
Institutions are an important means for fostering prosocial behaviors, but in many contexts they are limited in scope and can encourage only some desirable prosocial behaviors, while having little ability to influence others. We use a laboratory experiment to study how the presence and nature of an institution that enforces prosocial behavior in one domain affects behavior in other domains, beyond the institution’s reach. In addition, we study if and how the presence of an institution alters prosocial preferences and beliefs about others’ behavior. Groups play two identical public good games, with one game potentially governed by an institution enforcing cooperation. We vary whether the institution is absent, imposed exogenously, or arises endogenously through voting. We find that the presence of an institution in one game generally enhances cooperation in the other game. However, cooperation boosted by the exogenously imposed institution shows greater decay over time than if the institution is endogenously determined. Additional treatments suggest that the main driver of this effect is the temporal trend of the implemented institution. Institutions that are initially weak, but strengthen over time, lead to an initially weak positive spillover effect that similarly strengthens over time; institutions that are initially strong and stable over time lead to an immediate spillover effect that does not strengthen over time and therefore follows the general deterioration in cooperation levels. We also find that the presence of institutions of either type strengthens beliefs about others’ prosocial behavior and enhances prosocial preferences, even toward strangers.