When to leave carrots for sticks: on the evolution of sanctioning institutions in open communities

When asked, people dislike punishment institutions, although punishment is more effective than rewards to maintain cooperation in social dilemmas. Which institution do they choose in the long run? We study migration patterns in a laboratory experiment that allows participants to migrate continuously between punishment and reward communities. The majority of participants initially chooses the reward institution, but a substantial number of subjects joins the less profitable punishment community subsequently. In this case, the mere threat of punishment establishes high contributions. Income differences and missing compensations for cooperators in the reward community are the key factors for the decision to migrate.