Profitable Third-Party Punishment Destabilizes Cooperation

Third-party punishment is theorized to be essential to the evolution of large-scale cooperation. However, across eight economic games and judgment experiments (including three pre-registered studies), we find that offering monetary payments to incentivize third-party punishment destabilizes cooperation. When third-party punishment is profitable, rates of cooperation fall immediately and remain lower even when punishment outcomes are optimized to support cooperative behavior. Profitable punishment causes targets of punishment to distrust punishers and perceive social norms in terms of self-interest, suggesting that the introduction of payment degrades the socio-moral signal that punishment is meant to convey about punishers’ intentions and social norms. Participants who benefit from increased cooperation reduce their own monetary compensation by opting in to experimental conditions that pay punishers, suggesting that they fail to consider the socio-moral signaling consequences of profitable punishment. Implications for systems of punishment and cooperation in real-world contexts are discussed.