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on Cognitive and Behavioural Economics |
| By: | Guererk, Oezguer; Rockenbach, Bettina; Wolff, Irenaeus |
| Abstract: | Considerable experimental evidence shows that although costly peer-punishment enhances cooperation in repeated public-good games, heavy punishment in early rounds leads to average period payoffs below the non-cooperative equilibrium benchmark. In an environment where past payoffs determine present contribution capabilities, this could be devastating. Groups could fall prey to a poverty trap or, to avoid this, abstain from punishment altogether. We show that neither is the case generally. By continuously contributing larger fractions of their wealth, groups with punishment possibilities exhibit increasing wealth increments, while increments fall when punishment possibilities are absent. Nonetheless, single groups do succumb to the above-mentioned hazards. |
| Keywords: | Public good; Dynamic game; Punishment; Endowment endogeneity; Poverty-trap; Experiment |
| JEL: | H41 C91 C73 |
| Date: | 2010–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22097&r=cbe |
| By: | Pablo Guillen (The University of Sydney); Danielle Merrett (The University of Sydney) |
| Abstract: | We propose an intergroup competition scheme (ICS) to solve the free-riding problem in the public goods game. Our solution only requires knowledge of the group contributions, is budget balanced and with the right parameters a dominant strategy. The main innovations of our design are that the prize to the winning group is paid by the losing group and that the size of the transfer depends on the difference in contribution by the two groups. With the right parameters, this scheme changes the dominant strategy from none to full contribution. We tested different parameterizations for the ICS. The experiments show dramatic gains in efficiency in all the ICS treatments. Moreover, versions of the ICS in which intergroup competition should not change the zero contribution Nash equilibrium also produce remarkable gains in efficiency and no decline in contributions over time. |
| Keywords: | public goods, intergroup competition, team production, voluntary contributions mechanism, economic experiments |
| Date: | 2010–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:10/03&r=cbe |
| By: | Tan, Jonathan H.W.; Breitmoser, Yves; Bolle, Friedel |
| Abstract: | We study games where voluntary contributions can be adjusted until a steady state is found. In consent games contributions start at zero and can be increased by consent, and in dissent games contributions start high and can be decreased by dissent. Equilibrium analysis predicts free riding in consent games but, in contrast, as much as socially efficient outcomes in dissent games. In our experiment, inexperienced subjects contribute high in consent games and low in dissent games, but behavior converges toward equilibrium predictions over time and eventually experienced subjects contribute as predicted: low in consent games and high in dissent games. Observed deviations from equilibrium in consent games are best explained by level-k reasoning, and those in dissent games are best explained by hierarchical reasoning formalized as nested logit equilibrium. |
| Keywords: | public good; contribution game; bounded rationality; mechanism |
| JEL: | C71 C44 H41 |
| Date: | 2010–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22001&r=cbe |