Solving the Volunteer's Dilemma : The Efficiency of Rewards versus Punishments

This paper studies a class of second-best solutions to the Volunteer's Dilemma. We consider a simultaneous-move game involving n players, each of whom can prevent social harm at a cost. Players could be rewarded for helping, be punished for not helping, or be subject to any combination of rewards and punishments. One such mechanism, for example, offers each player a reward for helping and imposes on each player a punishment for not helping if no other player provides help. We show that, because players' efforts are substitutes, the use of rewards, rather than punishments, minimizes social costs (sum of expected cost of helping, expected harm, and expected costs of implementation) for nearly any number of players and ratio of cost-of-helping to social harm. Our analysis helps to explain the paucity of affirmative legal duties and is consistent with pecuniary rewards bestowed on volunteers such as whistle-blower and most-wanted awards