Does insurance against punishment undermine cooperation in the evolution of public goods games?

In a public goods game, cooperation can be a stable outcome if defectors are facing efficient punishment. In some public goods systems, punishment is undermined by an insurance system where speculators buy a policy that sequentially covers all punishment costs. Here, we study a simple model to investigate the question whether stable cooperation can break down in the presence of such speculation. We do indeed find scenarios where speculation either leads to the reduction of the basin of attraction of the cooperative equilibrium or even the loss of stability of this equilibrium. This however only happens if the costs of the insurance are lower than the expected fines faced by a defector. We argue that an insurance of this type is not viable and conclude that under realistic assumptions speculation does not destabilize cooperation.

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