Endogenous Move Structure and Voluntary Provision of Public Goods: Theory and Experiment

In this paper, we examine voluntary contributions to a public good, embedding Varian's (1994) voluntary contribution game in extended games that allow players to choose the timing of their contributions. We show that predicted outcomes are sensitive to the structure of the extended game, and also to the extent to which players care about payoff inequalities. We then report a laboratory experiment based on these extended games. We find that behavior is similar in the two extended games: subjects avoid the detrimental move order of Varian's model, where a person with a high value of the public good commits to a low contribution, and instead players tend to delay contributions. These results suggest that commitment opportunities may be less damaging to public good provision than previously thought.     

Contribution to a public good under subjective uncertainty

This paper examines how voluntary contributions to a public good are affected by the contributors' heterogeneity in beliefs about the uncertain impact of their contributions. It assumes that contributors have Savagian preferences that are represented by a two‐state‐dependent expected utility function and different beliefs about the benefit that will result from the sum of their contributions. We establish general comparative statics results regarding the effect of specific changes in the distribution of beliefs on the (unique) Nash equilibrium provision of the public good, under certain conditions imposed on the preferences. We specifically show that the equilibrium public good provision is increasing with respect to both first‐ and second‐order stochastic dominance changes in the distribution of beliefs. Hence, increasing the contributors' optimism about the uncertain benefit of their contributions increases aggregate public good provision, as does any homogenization of these beliefs around their mean.     

Finitely Repeated Voluntary Provision of a Public Good

This paper theoretically explores the voluntary provision of a public good when either one of the following holds: (i) agents’ utility is the sum of their monetary earnings and a nonmaterial component, or (ii) agents’ exhibit satisficing behavior. We show that a small degree of either nonmaterial payoffs or satisficing behavior can generate large contributions in a finitely repeated game, even if the incentive to free‐ride on others’ contributions calls for negligible public good provision in the static game. The equilibrium is characterized by a sharp decline in contributions toward the end of the game. Several comparative results regarding group size and technology are consistent with laboratory data obtained in experimental studies. The model also predicts the restart effect observed in previous experiments.     

PUBLIC RADIO STATIONS ARE REALLY, REALLY NOT PUBLIC GOODS: Charitable contributions and impure altruism

This paper applies the censored regression model under several distributional assumptions to data on charitable giving to public radio stations. The authors show that charitable contributions are positively affected by the level of use of a pure public good. Wing this factor into account they additionally show thd contributions to public radio do not support the public good hypothesis, but rather donors behave as impure altruists.     

‘Expressive’ obligations in public good games: Crowding-in and crowding-out effects

We study individual contributions in a repeated linear public good experiment in which, in each period, subjects are required to contribute a minimum amount and face a certain probability of being audited. Audited subjects who contribute less than the required amount are convicted to pay the difference between the obligation and the voluntary contribution. We investigate the ‘expressive’ force of the obligations. While at early stages subjects contribute the minimum level, with repetition contributions decline below the required amount. We observe that expressive obligations exert a rather robust crowding-out effect on voluntary contributions as compared to a linear public good game. Crowding-out is stronger when payments collected through the auditing procedure are distributed to subjects rather than when they are a deadweight loss.     

Dissertation abstract: Contribution to a public good - Theoretical analysis and experimental evidence

The work undertook is located between Public Economic Theory and Experimental Economics. The object of the thesis consists in analysing the aggregate behavior and the individual heterogeneity in a voluntary contribution game. The thesis defended here is that overcontribution in comparison to the Nash equilibrium of the game, can not be explained neither by judgement errors, nor by the information on the individual behaviour of the members in a one given group. The level of contribution observed remains nevertheless inferior to the one simulated using the E.W.A. learning model. The dissertation is composed of three parts and six chapters. The first chapter expresses the various theoretical mechanisms of production of a public good, while the second one presents an overview of the experimental literature using voluntary contribution mechanisms. The second part carries on the introduction of an interior solution in a public good game in order to distinguish an explanation of overcontribution in terms of mistakes or strategies. While chapter three presents the most important works in literature that use an interior solution, the fourth chapter constitutes a personal contribution consisting in an experiment with an interior optimum. Our main result is that individuals contribute a constant part of their social optimum and that overcontribution is not explained by error. We test then the simple learning model R.L. using the observed data on the aggregate level. This model predicts well the observed behaviour. The third part is composed of two experiments where the environment of players is modified. We introduce in chapter five promises as cheap talk and find that they increase contributions at the aggregate level. In chapter six, various conditions of information on individual contributions are tested. The parameter tested is the level of information on “neighbours” contributions given to players. One of the treatments presents full information about individual contributions of the members of the group, while this information is incomplete in the other treatments. Our results show that information has no effect on the level of contribution. We simulate then the EWA learning model both at the aggregate and the individual levels and compare the simulated data to the experimental one. These simulations predict a level of contribution that is higher that the one observed in the experiment. JEL Classification C91, C92, H41 Dissertation Committee: Alan Kirman (Ph.D. Advisor), Université d’Aix-Marseille III Marie-Claire Villeval (Chair), GATE, Lyon, France Jordi Brandts, Universitat Autonoma Barcelona, Spain Charles Noussair, Emory University, Alanta, GA, U.S.A. Sylvie Thoron, GREQAM & Université du Var, France Marc Willinger, Université de Montpellier I, France     

Public goods provision,inequality and taxes

The impact of redistributive policies on voluntary contributions is still not well understood. While a higher level of redistributive taxation decreases the price of voluntary giving, it also changes the income distribution by decreasing income inequality. This paper provides a controlled laboratory experiment to investigate the net impact of the tax rate on public goods provision. The experimental findings show that while the participants decrease their voluntary contributions as the pre-tax income distribution becomes more equal, they increase their contributions with taxation. These findings have important implications for government policies regarding privately provided public goods.     

An Experimental Investigation of Excludable Public Goods

This paper extends the research on incentive compatible institutions for the provision of public goods by imposing a minimum contribution that must be met in order for an individual to enjoy the benefits of the public good. Excluding individuals who do not contribute at least the minimum transforms the linear n-player pure public goods game to an n-player coordination game with multiple, Pareto-ranked Nash equilibria. The experimental results show that exclusion increases contributions to the public good in most cases. However, an increase in contributions may not be sufficient to increase social welfare because there is a welfare cost to excluding individuals when the good is non-rival. Furthermore, exclusion can decrease both contributions and welfare in environments in which individuals fail to coordinate their contributions. The results are sensitive to the minimum contribution requirement and to the relative returns from the public and private alternatives.     

Improving Voluntary Public Good Provision Through a Non-governmental,Endogenous Matching Mechanism: Experimental Evidence

Social norms can help to foster cooperation and to overcome the free-rider problem in the private provision of public goods. This paper focuses on the endogenous establishment of an average-oriented norm which sanctions deviations from average public good contributions. In a laboratory experiment, we analyse whether subjects are willing to implement a punishment and reward scheme at their own expense by applying the theory of non-governmental norm enforcement put forward by Buchholz et al. (J Public Econ Theory 16(6):899–916, 2014). Based on their theory, which omits a central authority but introduces an endogenously determined enforcement mechanism, we implement a two-stage public good game. In the first stage, subjects determine the strength of the sanctioning mechanism on their own. In the second stage, they decide on their personal contributions to the public good based on the established mechanism. In line with comparable pool punishment experiments, we find that subjects are apparently willing to contribute funds in order to establish a norm enforcement mechanism. Groups over-invest in the mechanism, but this over-investment decreases over time. These investments seem to be driven by the subjects’ previous individual contributions and partly by a number of strategic considerations, i.e. the previous average contribution made to the public good lowers the investment in the sanctioning mechanism. In the second stage of our experiment, higher norm enforcement parameters tend to lead to higher public good contributions. The earnings with the mechanism are on average higher than without.     

Public Policy with Endogenous Preferences

Public policy may influence norms and preferences. By altering the payoffs associated with different preferences, public policy may influence the distribution of these preferences in the population. Such interdependence between policy and preferences may limit (or enhance) the effectiveness of different policies. We demonstrate this idea with a simple model of subsidizing contributions to a public good. While the short‐run effect of such a subsidy will be an increase in the overall contribution, the subsidy triggers an endogenous preference change that results in a lower level of contribution to the public good, despite the explicit monetary incentives to raise that level.     

Income Heterogeneity in the Voluntary Provision of Dynamic Public Goods

This paper explores the effect of income inequality on the voluntary contributions to a dynamic public good. We find that income heterogeneity has a significant impact both on contributions and welfare. The results show that the often observed decay of cooperation does not carry over to the asymmetric environment considered in this study. Our results also suggest that subjects in each income class make different contribution amounts in an absolute sense and give the same percentage of their income. Moreover, we find that contributions of individuals with the same endowment are sensitive to how heterogeneous the environment is.     

Sequential vs. simultaneous contributions to public goods: Experimental evidence

We report an experiment comparing sequential and simultaneous contributions to a public good in a quasi-linear two-person setting. In one parameterization we find that overall provision is lower under sequential than simultaneous contributions, as predicted, but the distribution of contributions is not as extreme as predicted and first movers do not attain their predicted first-mover advantage. In another parameterization we again find that the distribution of contributions is not as predicted when the first mover is predicted to free ride, but we find strong support for equilibrium predictions when the second mover is predicted to free ride. These results can be explained by second movers' willingness to punish first movers who free ride, and unwillingness to reward first movers who contribute.     

Herding with collective preferences

This paper studies a simple model of observational learning where agents care not only about the information of others but also about their actions. We show that despite complex strategic considerations that arise from forward-looking incentives, herd behavior can arise in equilibrium. The model encompasses applications such as sequential elections, public good contributions, and leadership charitable giving.     

Threshold uncertainty in the private-information subscription game

We introduce threshold uncertainty, à la Nitzan and Romano (1990), into a private-values model of voluntary provision of a discrete public good. Players are allowed to make any level of contribution toward funding the good, which is provided if the cost threshold is reached. Otherwise, contributions are refunded. Conditions ensuring existence and uniqueness of a Bayesian equilibrium are established. Further restricting the threshold uncertainty to a uniform distribution, we show the equilibrium strategies are very simple, even allowing for any number of players with asymmetric distributions of values. Comparative statics with respect to changes in players' distributions are derived, allowing changes in both the intensity and the dispersion of values. For example, increased uncertainty, in the sense of mean-preserving spreads of players' distributions of values, increases equilibrium contributions. Finally, we show the equilibrium is interim incentive inefficient. The sharpness of our results greatly contrasts with the more qualified insights of earlier private-values models with known cost threshold, which relied on there being two symmetric players and generally exhibited multiple equilibria.     

Strength of the Social Dilemma in a Public Goods Experiment: An Exploration of the Error Hypothesis

We present the results of an experiment on voluntary contributions to a public good with a unique dominant strategy equilibrium in the interior of the strategy space. The treatment variable is the equilibrium contribution level. By increasing the equilibrium contribution level, we reduce the strength of the social dilemma. Though we observe that the average level of contribution rises with the equilibrium contribution level, the average rate of over-contribution is not affected in a systematic way. Over-contribution is statistically significant only at the lower level of equilibrium contribution but not at the higher levels. We show that the Anderson et al. (1998, Journal of Public Economics. 70, 297–323) logit equilibrium model which combines altruism and decision errors fits quite well our laboratory data.     

PRIVATE PROVISION OF PUBLIC GOODS AND INFORMATION DIFFUSION IN SOCIAL GROUPS

I describe a dynamic model of costly information sharing where private information affecting collective‐value actions is transmitted by social proximity. Individuals make voluntary contributions toward the provision of a pure public good, and information transmission about quality of provision is a necessary condition for collective provision to take place in a stationary equilibrium. I show that unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbors and that these incentives are stronger and provision of the pure public good greater the smaller are individuals' social neighborhoods.     

An experimental dynamic public goods game with carryover

We examine voluntary contributions in a two-stage public good experiment with ‘carryover.’ In two treatments, each subject's second-stage endowment is determined by the return from the public good in the first-stage. We manipulate payoffs across treatments such that, relative to our no-carryover baseline, earnings from either Nash Equilibrium (constant NE) play or Pareto Optimal (constant PO) play are held constant. The remaining two treatments maintain a constant endowment in each stage, but vary the marginal per capita return (MPCR high or MCPR low) to contributions in the second-stage. Our results indicate that carryover increases first-stage contributions. Our implementation of carryover enables us to examine the effects of changing endowments and a wide range of MPCR's. Consistent with the literature, we find that MPCR and endowment effects are important determinants of subject contributions to the group account. While stage 1 contributions tend to increase in the presence of carryover, efficiency levels across both stages fall relative to the baseline. Efficiency levels fall because the maximum earnings possible increase with carryover (due to higher endowments or MPCR levels in stage 2).     

Funding Public Goods with Lotteries: Experimental Evidence

Why do individuals participate in charitable gambling activities? We conduct a laboratory investigation of a model that predicts risk-neutral expected utility maximizers will participate in lotteries when they recognize that lotteries are being used to finance public goods. As predicted by the model, we find that public goods provision is higher when financed by lottery proceeds than when financed by voluntary contributions. We also find support for other comparative static predictions of the model. In particular we find that ticket purchases vary with the size of the fixed prize and with the return from the public good: lotteries with large prizes are more effective, and ticket purchases drop dramatically when the public good is not valued by subjects.