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In dealing with peer punishment as a cooperation enforcement device, laboratory studies have typically concentrated on discretionary sanctioning, allowing players to castigate each other arbitrarily. While such 'vigilante justice' turns out to enhance cooperation when retaliation is prohibited, this comes at a substantial cost, as welfare levels are usually low. By contrast, in real life punishments are often meted out only insofar as punishers are entitled to punish and punishees deserve to be punished. We provide an experimental test for this 'legitimate punishment' institution in the framework of a public goods game, by comparing it with a discretionary punishment mechanism. Our findings show that, despite the lack of additional monetary incentives and the risk to produce motivation crowding-out effects on subjects' propensity to cooperate, the introduction of legitimate punishment leads to substantial efficiency gains. Further, players' earnings are significantly higher. We also focus on the role of feedback and we interestingly find that removing the information over high contributors' choices only leads to a dramatic decline in cooperation rates and earnings. This interaction result implies that providing feedback over virtuous behavior in the group is necessary to make an institution based on legitimate punishment effective.

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The great pleasure of conversation, and indeed of society, arises from a certain correspondence of sentiments and opinions, from a certain harmony of minds, which like so many musical instruments coincide and keep time with one another.-Adam Smith, The Theory of Moral Sentiments, 1759 W hy are people who hold one set of beliefs so affronted by alternative sets of beliefs-and by the people who hold them? Why don't people take a live-and-let-live attitude toward beliefs that are, after all, invisibly encoded in other people's minds? In this paper, we present evidence that people care fundamentally about what other people believe, and we discuss explanations for why people are made so uncomfortable by the awareness that the beliefs of others differ from their own. This preference for belief consonance (or equivalently, distaste for belief dissonance) has far-ranging implications for economic behavior. It affects who people choose to interact with, what they choose to exchange information about, what media they expose themselves to, and where they choose to live

a b s t r a c tThis paper presents empirical evidence that "tax morale" -taxpayers' intrinsic motivation to pay taxes -constitutes a new determinant of happiness, even after controlling for several demographic and socioeconomic factors. Using data on Italian households for 2004, we assess the strength of tax morale by relying on single items as well as composite multiitem indices. Our main result that fiscal honesty generates a higher hedonic payoff than cheating is in line with Harbaugh et al. (2007)'s neuroeconomic finding. Further, it sheds light on the well-known "puzzle of compliance", that is the fact that many individuals pay taxes even when expected penalty and audit probability are extremely low: tax compliance is less puzzling once we show that not only it is materially costly, but also provides sizeable non-pecuniary benefits that make it rewarding in itself.