Anticipated Third-Party Rewards. Experimental Evidence on Social Control and Cooperation

This contribution honors Christoph Engel’s pioneering research on rule-following, legitimacy, and the institutional foundations of cooperation. Building on his experimental law and economics agenda, I investigate how anticipated third-party rewards influence trust and reciprocity in strategic interaction. The laboratory design combines a trust game with a subsequent helping game, in which Observers reward Trustees based on their behavior. Treatments vary depending on whether Investors and Trustees are informed in advance about the presence of Observers. Consistent with Engel’s findings on conditional rule-following and the motivating power of institutions, the results show that Observers reward Trustees more generously when return transfers are higher, and that Trustees return more when they anticipate being observed. However, this strategic adjustment does not lead to higher investments by Investors, highlighting both the reach and the limits of anticipated indirect reciprocity. The study thus illuminates the subtle mechanisms through which institutions shape cooperation, while paying tribute to Engel’s lifelong commitment to understanding how norms, roles, and third parties sustain social order.