Delegation and Public Pressure in a Threshold Public Goods Game: Theory and Experimental Evidence

Date: 2016-03
By: Doruk Iris (Sogang University)
Jungmin Lee (Sogang University and Institute for the Study of Labor (IZA))
Alessandro Tavoni (London School of Economics, Grantham Research Institute on Climate Change and Environment)
The provision of global public goods, such as climate change mitigation and managing fisheries to avoid overharvesting, requires the coordination of national contributions. The contributions are managed by elected governments who, in turn, are subject to public pressure on the matter. In an experimental setting, we randomly assign subjects into four teams, and ask them to elect a delegate by a secret vote. The elected delegates repeatedly play a one shot public goods game in which the aim is to avoid losses that can ensue if the sum of their contributions falls short of a threshold. Earnings are split evenly among the team members, including the delegate. We find that delegation causes a small reduction in the group contributions. Public pressure, in the form of teammates’ messages to their delegate, has a significant negative effect on contributions, even though the messages are designed to be payoff-inconsequential (i.e., cheap talk). The reason for the latter finding is that delegates tend to focus on the least ambitious suggestion. In other words, they focus on the lower of the two public good contributions preferred by their teammates. This finding is consistent with the prediction of our model, a modified version of regret theory.
Keywords: Delegation, Cooperation, Threshold Public Goods Game, Climate Experiment, Regret Theory
JEL: C72 C92 D81 H4 Q54

Authority and Centrality: Power and Cooperation in Social Dilemma Networks

Date: 2015-03
By: Ramalingam, Abhijit
Rojo Arjona, David
Schram, Arthur
Van Leeuwen, Boris
We investigate the effects of power on cooperation in repeated social dilemma settings. Groups of five players play either multi-player trust games or VCM-games on a fixed network. Power stems from having the authority to allocate funds raised through voluntary contributions by all members and/or from having a pivotal position in the network (centrality). We compare environments with and without ostracism by allowing players in some treatments to exclude others from further participation in the network. Our results show that power matters but that its effects hinge strongly on the type involved. Reminiscent of the literature on leadership, players with authority often act more cooperatively than those without such power. Nevertheless, when possible, they are quickly ostracized from the group. Thus, this kind of power is not tolerated by the powerless. In stark contrast, centrality leads to less cooperative behavior and this free riding is not punished; conditional on cooperativeness, players with power from centrality are less likely to be ostracized than those without. Hence, not only is this type of power tolerated, but so is the free riding it leads to.
Keywords: power, cooperation, networks, public goods
JEL: C91 D02 D03 H41

Promoting Competition or Helping Less-Endowed? An Experiment on Collective Institutional Choices under Intra-Group Inequality

Date: 2014-06-20
By: Kamei, Kenju
Unequally-distributed resources, whether people’s income or competence, are ubiquitous in our real world. Whether to promote competition or to lead to a more equal environment is often in question in societies or organizations. With heterogeneous endowments, we let subjects collectively choose whether to have a competitive lottery contest – where only one individual in a group wins and receives an award, generating a greater income inequality – or to have a public good that benefits the less-endowed to a greater degree. Our data indicates that highly-endowed individuals contribute little when the public good is selected. The majority of subjects, however, vote in favor of having a public good, contrary to the standard theory predictions. In addition, a belief elicitation task shows that they expect payoffs to be more equally distributed under the public good regime than under the contest regime. Moreover, the subjects’ preferences between the two regimes are little affected by their risk attitudes or the size of awards in competition. These suggest that people’s institutional choices are driven more by their income inequality-averse preferences.
Keywords: heterogeneity, experiment, cooperation, competition, public goods, inequality
JEL: C92 D63 D70 D72 H4

Cooperation in Small Groups: The Effect of Group Size

Date: 2013-05
By: Daniele Nosenzo (School of Economics, University of Nottingham)
Simone Quercia (School of Economics, University of Nottingham)
Martin Sefton (School of Economics, University of Nottingham)
We study the effect of group size on cooperation in voluntary contribution mechanism games. As in previous experiments, we study four- and eight-person groups in high and low marginal per capita return (MPCR) conditions. We find a positive effect of group size in the low MPCR condition, as in previous experiments. However, in the high MPCR condition we observe a negative group size effect. We extend the design to investigate two- and three-person groups in the high MPCR condition, and find that cooperation is highest of all in two-person groups. The findings in the high MPCR condition are consistent with those from n-person prisoner’s dilemma and oligopoly experiments that suggest it is more difficult to sustain cooperation in larger groups. The findings from the low MPCR condition suggest that this effect can be overridden. In particular, when cooperation is low other factors, such as considerations of the social benefits of contributing (which increase with group size), may dominate any negative group size effect.
Keywords: voluntary contribution mechanism, cooperation, group size

Understanding the Nature of Cooperation Variability

Date: 2013-03-19
By: Fosgaard, Toke (Department of Food and Resource Economics, University of Copenhagen)
Hansen , Lars Gårn (Department of Food and Resource Economics, University of Copenhagen)
Wengström, Erik (Department of Economics, Lund University)
We investigate framing effects in a large-scale public good experiment. We measure indicators of explanations previously proposed in the literature, which when combined with the large sample, enable us to estimate a structural model of framing effects. The model captures potential causal effects and the behavioral heterogeneity of cooperation variability. We find that framing only has a small effect on the average level of cooperation but a substantial effect on behavioral heterogeneity and we show that this can be explained almost exclusively by a corresponding change in the heterogeneity of beliefs about other subjects’ behavior. Preferences are on the other hand stable between frames.
Keywords: Framing; Public Goods; Internet Experiment; Simulation
JEL: C13

‘Lead, Follow or Cooperate’: Endogenous Timing & Cooperation in Symmetric Duopoly Games.

‘Lead, Follow or Cooperate’: Endogenous Timing & Cooperation in Symmetric Duopoly Games.

Date: 2011
By: Marco Marini (Department of Economics, Society & Politics, Università di Urbino “Carlo Bo" and CREI, Università di Roma III)
Giorgio Rodano (Dipartimento di Informatica e Sistemistica “Antonio Ruberti", Università di Roma “La Sapienza")
The aim of this paper is to extend Hamilton and Slutsky’s (1990) endogenous timing game by including the possibility for players to cooperate. At an initial stage players are assumed to announce both their purpose to play early or late a given duopoly game as well as their intention to cooperate or not with their rival. The cooperation and timing formation rule is rather simple: when both players agree to cooperate and play with a given timing, they end up playing their actions coordinately and simultaneously. Otherwise, they play as singletons with the timing as prescribed by their own announcement. We check for the existence of a subgame perfect Nash equilibrium (in pure strategies) of such a cooperation-timing duopoly game. Two main results on the emergence of cooperation are provided. If players’ actions in the symmetric duopoly game are strategic substitutes and there is no discount, cooperating early (as a grand coalition) is a subgame perfect equilibrium of the extended timing-cooperation game. Conversely, cooperating late (at period two) represents an equilibrium when playersstrategies are strategic complements. Other equilibria are also possible. Most importantly, our model shows that, in general, the success of cooperation is a¤ected by the endogenous timing of the game. Moreover, the slope of players’ best-replies appears crucial both for the success of cooperation as well as for the players’ choice of sequencing their market actions.
Keywords: Endogenous Timing, Cooperation
JEL: C70