Solving the second-order free rider problem in a public goods game: An experiment using a leader support system

By: Hiroki Ozono (Faculty of Law, Economics and Humanities, Kagoshima University)
Nobuhito Jin (School of Psychology Practices, College of Integrated Human and Social Welfare Studies, Shukutoku University)
Motoki Watabe (School of Business, MonashUniversity, Malaysia, Jalan Lagoon Selatan)
Kazumi Shimizu (School of Political Science and Economics, Waseda University)
URL: http://d.repec.org/n?u=RePEc:wap:wpaper:1604&r=net
To study the collective action problem, researchers have investigated public goods games (PGG), in which each member decides to contribute to a common pool that returns benefits to all members equally. Punishment of non-cooperators—free riders—can lead to high cooperation in PGG. However, the existence of second-order free riders, who do not pay punishment costs, reduces the effectiveness of punishment. We focus on a “leader support system,” in which one group leader can freely punish group followers using capital pooled through the support of group followers. In our experiment, participants were asked to engage in three stages: a PGG stage in which followers decided to cooperate for their group; a support stage in which followers decided whether to support the leader or not; and a punishment stage in which the leader could punish any follower. We found both higher cooperation and higher support for a leader achieved under linkage-type leaders—who punished both non-cooperators and non-supporters. In addition, linkage-type leaders themselves earned higher profits than other leader types because they withdrew more support. This means that a leader who effectively punishes followers could increase their own benefits and the second-order free rider problem would be solved.
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