Punishment is often regarded as a way to promote future cooperation, when people behave uncooperatively. However, there is a potential retaliation cycle between punishment by people who are treated uncooperatively and retaliation by those who are punished. These cycles can be mutually destructive, leading to long-running feuds and conflicts. One powerful factor is driving such cycles appears to emotions, especially anger. Anger can motivate people to engage in punishment which will be costly to be both parties---which may appear fundamentally irrational, according to conventional rational choice models. But anger has, nonetheless, a rational function---without it, a purely forward-looking rational agent may not credibly threaten to punish; and hence the other may be uncooperative with impunity.

The present project applies a new theory of rational interaction, virtual bargaining, to understand anger and punishment. According to virtual bargaining, people form implicit agreements about 'appropriate' behaviour; and these agreements will include implicit expectations of punishment, if behaviour is uncooperative. "Moral" emotions such as anger function to "police" agreements---so that both parties know that punishment may occur, even when carrying that punishment is mutually destructive---and hence potentially enhancing cooperation. According to this viewpoint, moral emotions, and subsequent punishment, depend crucially on common knowledge of the implicit agreement.
Most previous studies of punishment have used public good games. To combine emotion and punishment, some researchers drew on previous studies to create a social dilemma game, which is similar to the trust game but includes a dynamic punishment setting. Based on previous studies in this area, we will use the lab experimental method to explore these questions. In terms of theoretical contributions, this project will extend the virtual bargaining theory to punishment and will elucidate the function of emotions in the punishment process. With regard to its implications, this project provides a better understanding of punishment and retaliation behaviour in the social context, and of the function of emotion (e.g., anger) in bargaining and in daily life. Furthermore, it also has a broad contribution for us to reconsider people's behaviour in punishment context of our moral life without strong law enforcement. Moreover, this gives us some inspirations on extending virtual bargaining to punishment with law enforcement (e.g., third party) to help us understand the efficiency of punishment laws making for criminals. In summary, this project contributes to the literature of psychology, economics, ethics etc. under the novel virtual bargaining, and to the implication on individuals and on policy or lawmakers.