Truth, trust, and sanctions: On institutional

2007 This paper reports on a laboratory experiment which investigates the impact of in-stitutions and institutional choice in constant-sum sender-receiver games. We compare individual sender and receiver behavior in two different institutions: A sanction-free in-stitution which is given by the bare sender-receiver game and a sanctioning institution which in addition offers the receiver the opportunity to (costly) sanction the sender after receiving feedback on the senders private information. We conduct the experiment in two phases: First, individuals are randomly assigned to an institution, and second they can choose the institution themselves. We find that sanctioning takes place predominantly after the receiver has trusted a lie by the sender. Those who are responsible for sanctioning are also responsible for truth-telling in excess with respect to models of rational payoff-maximizing agents. Thereby, the sanctioning institution exhibits more truth-telling. Most importantly, agents who sanction reveal preference for the sanctioning institution while the other subjects almost exclusivel