The take-it-or-leave-it option allows small penalties to overcome social dilemmas

Self-interest frequently causes individuals engaged in joint enterprises to choose actions that are counterproductive. Free-riders can invade a society of cooperators, causing a tragedy of the commons. Such social dilemmas can be overcome by positive or negative incentives. Even though an incentive-providing institution may protect a cooperative society from invasion by free-riders, it cannot always convert a society of free-riders to cooperation. In the latter case, both norms, cooperation and defection, are stable: To avoid a collapse to full defection, cooperators must be sufficiently numerous initially. A society of free-riders is then caught in a social trap, and the institution is unable to provide an escape, except at a high, possibly prohibitive cost. Here, we analyze the interplay of (a) incentives provided by institutions and (b) the effects of voluntary participation. We show that this combination fundamentally improves the efficiency of incentives. In particular, optional participation allows institutions punishing free-riders to overcome the social dilemma at a much lower cost, and to promote a globally stable regime of cooperation. This removes the social trap and implies that whenever a society of cooperators cannot be invaded by free-riders, it will necessarily become established in the long run, through social learning, irrespective of the initial number of cooperators. We also demonstrate that punishing provides a "lighter touch" than rewarding, guaranteeing full cooperation at considerably lower cost.
KEYWORDS: Punishment; Rewards; Public goods; Social contact; Evolutionary games

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