Appeasing yourself or others? The use of self-punishment and compensation and how it influences punishment

This paper analyzes experimental data to better understand self-punishment and compensation as potential means for making amends for having caused distributional harm and inefficiency. Our design allows for and disentangles intended harm and unintended harm. In our data, subjects infrequently self-punish, whereas they frequently offer compensation. Appeasement tactics are used particularly when the harmed party can punish the harm doer. Compensation is an informative signal for the harm doer’s benign intent, which does not similarly apply to self-punishment. Both self-punishment and compensation lower the punishment level imposed by the harmed party on the harm doer, whereas results regarding the probability of punishment are less clear.