Power to the People? An Experimental Analysis of Bottom-Up Accountability of Third-Party Institutions

This article provides an experimental investigation of third parties' sanctioning behavior, in order to understand whether public officials (e.g., judges, politicians, or regulators), when deciding about top-down interventions aimed at punishing wrongdoers, are sensitive to bottom-up pressure on the part of ordinary citizens, who are the major victims of wrongdoers' behavior. We set up a novel five-treatment design and compare situations where a wrongdoer acts under: (1) no third-party punishment; (2) nonaccountable third-party punishment; and (3) accountable third-party punishment. We show that when citizens are active and make their voice heard, public officials sanction wrongdoing significantly more. Our experimental finding complements previous empirical work based on field data and suggests that when third-party institutions are held accountable, their propensity to fight misconduct is higher, other things equal. We view this result as good news with regard to domains where it implies that pro-consumer policies will be more likely (e.g., regulatory policies). The risk of pandering by elected officials and the danger of poorly informed decisions by the citizens are the flip side of the argument. (JEL C91, D02, D63, D72, K00)