Coordinated Punishment? Only if Reciprocators Abound

Abstract In this paper, we explore under which conditions coordinated punishment performs better than uncoordinated punishment in a team trust game with information asymmetries. We theoretically compare: (i) an uncoordinated punishment system where individual punishment is effective, and (ii) a coordinated punishment system where a minimum number of individuals carrying out punishment is needed for punishment to be effective. Our results reveal that only when there is a sufficiently high proportion of reciprocal investors in the population, a coordinated punishment system leads to efficient equilibria in a wider range of cases than uncoordinated punishment and it does so with higher returns and higher levels of social welfare.