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We investigate the intrinsic motivation of individuals to report, and thereby sanction, fellow group members who lie for personal gain. We further explore the changes in lying and reporting behavior that result from giving individuals a say in who joins their group. We find that enough individuals are willing to report lies such that in fixed groups lying is unprofitable. However, we also find that when groups can select their members, individuals who report lies are generally shunned, even by groups where lying is absent. This facilitates the formation of dishonest groups where lying is prevalent and reporting is nonexistent.

Economic and social interaction takes place between individuals with heterogeneous characteristics. We investigate experimentally the emergence and informal enforcement of different contribution norms to a public good in homogeneous and different heterogeneous groups. When punishment is not allowed all groups converge towards free-riding. With punishment, contributions increase and differ distinctly across groups and individuals with different induced characteristics. We show econometrically that these differences are not accidental but enforced by punishment. The enforced contribution norms are related to fairness ideas of equity regarding contribution possibilities but not regarding earnings. Individuals with different characteristics tacitly agree on the norm to be enforced, even if this leads to large payoff differences. Our results also emphasize the role of details of the environment that may alter focal contribution norms in an important way.

This paper experimentally explores how the enforcement of cooperative behavior in a social dilemma is facilitated through institutional as well as emotional mechanisms. Recent studies emphasize the importance of negatively valued emotions, such as anger, which motivate individuals to punish free riders. However, these types of emotions also trigger retaliatory behavior by the punished individuals. This makes the enforcement of a cooperative norm more costly. We show that in addition to anger, ‘social’ emotions like shame and guilt need to be present for punishment to be an effective deterrent of uncooperative actions. They play a key role by subduing the desire of punished individuals to retaliate and by motivating them to behave more cooperatively in the future.