Cooperation in a risky world

We offer a novel investigation of the effect of environmental risk on cooperation in the Voluntary Contribution Mechanism. Our baseline is the standard setting, in which the personal return from the public good is deterministic, homogeneous, and publicly known. Our experimental treatments alter this classic design by making the marginal per capita return from the public good probabilistic. In the homogeneous risk (HomR) treatment, the random draw is made for the whole group, whereas in the heterogeneous risk (HetR) treatment, this happens independently for each group member. Our hypothesis is that different environmental risks may differently affect the ex post payoff inequalities, so that other‐regarding preferences (inequality aversion) may generate higher contributions in HomR than in HetR. Our main result is that the environmental risk does not affect the patterns of cooperation either in the one‐shot or in the finitely repeated version of the game. This suggests that the standard experimental methodology provides a robust and conservative measure of human cooperation.     

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.     

Freedom, enforcement, and the social dilemma of strong altruism

Cooperation in joint enterprises poses a social dilemma. How can altruistic behavior be sustained if selfish alternatives provide a higher payoff? This social dilemma can be overcome by the threat of sanctions. But a sanctioning system is itself a public good and poses a second-order social dilemma. In this paper, we show by means of deterministic and stochastic evolutionary game theory that imitation-driven evolution can lead to the emergence of cooperation based on punishment, provided the participation in the joint enterprise is not compulsory. This surprising result—cooperation can be enforced if participation is voluntary—holds even in the case of ‘strong altruism’, when the benefits of a player’s contribution are reaped by the other participants only.     

Half a Century of Public Software Institutions: Open Source as a Solution to Hold‐Up Problem

We argue that the intrinsic inefficiency of proprietary software has historically created a space for alternative institutions that provide software as a public good. We discuss several sources of such inefficiency, focusing on one that has not been described in the literature: the underinvestment due to fear of hold‐up. An inefficient hold‐up occurs when a user of software must make complementary investments, when the return on such investments depends on future cooperation of the software vendor, and when contracting about a future relationship with the software vendor is not feasible. We also consider how the nature of the production function of software makes software cheaper to develop when the code is open to the end users. Our framework explains why open source dominates certain sectors of the software industry (e.g., programming languages), while being almost non existent in some other sectors (e.g., computer games). We then use our discussion of efficiency to examine the history of institutions for provision of public software from the early collaborative projects of the 1950s to the modern “open source” software institutions. We look at how such institutions have created a sustainable coalition for provision of software as a public good by organizing diverse individual incentives, both altruistic and profit‐seeking, providing open source products of tremendous commercial importance, which have come to dominate certain segments of the software industry.     

Old‐age Social Security versus Forward Intergenerational Public Goods Provision

This paper introduces an overlapping‐generations model with earnings heterogeneity and borrowing constraints. The labour income tax and the allocation of tax revenue between social security and forward intergenerational public goods are determined in a bidimensional majoritarian voting game played by successive generations. The political equilibrium is characterized by an ends‐against‐the‐middle equilibrium where low‐income and high‐income individuals form a coalition in favour of a lower tax rate and less social security while middle‐income individuals favour a higher tax rate and greater social security. Government spending then shifts from social security to public goods provision if higher wage inequality is associated with a borrowing constraint and a high elasticity of marginal utility of youth consumption.     

Cooperation,Trust and Economic Development: An Experimental Study in China

Many previous empirical studies have suggested that cooperation and trust affect economic growth. However, the precise relationship between trust and cooperation (i.e. whether trust leads to cooperation or cooperation leads to trust) remains unclear and it is not known how the level of economic development affects the level of cooperation and trust. Using a combination of public goods, gambling game and trust game experiments, we investigate the links among cooperation, trust and economic development in four regions of China. Our results suggest that, first, there is a U‐shaped or V‐shaped relationship between cooperation and economic development. Second, on the one hand, cooperation leads to trust, and on the other hand, more cooperative behaviour may be created by rewarding trusting behaviour. Third, men are more cooperative and trusting than women. Furthermore, we find that the widely used ‘GSS trust’ question from the General Social Survey (GSS) does not predict either cooperation or trust, whereas the questions ‘GSS fair’ and ‘GSS help’ have weak predictive power for trusting behaviour but not for cooperative behaviour.     

Does the reliability of institutions affect public good contributions? Evidence from a laboratory experiment

Reliable institutions, i.e., institutions that live up to the norms that agents expect them to keep foster cooperative behavior. We experimentally confirm this hypothesis in a public goods game with a salient norm that cooperation was socially demanded and corruption ought not to occur. When nevertheless corruption attempts came up, groups that were told that ‘the system’ had fended off the attempts made considerably higher contributions to the public good than groups that learned that attempts only did not affect their payoffs or that were not exposed to corruption at all.     

Global Security Policies against Terrorism and the Free Riding Problem: An Experimental Approach

The World Trade Center attack has shed light on the urgent need to implement preventing measures against terrorism and to enhance cooperation in the global security system for all countries. However, international coordination cannot be taken for granted. It is often ineffective and likely to fail for several reasons. Perhaps the more prominent reason to explain failure in coordination is that collective actions against terrorism may suffer from the well‐known free riding problem. In this paper we experimentally investigate cooperation dilemma in counterterrorism policies by measuring to what extent international deterrence policy may suffer from free riding. In our game, contributions to the group account do not aim to increase the production of the public good but instead seek to decrease the probability that a stochastic event destroys the good. A country could choose to free ride by investing nothing in the international deterrence policy and instead invest all its resources in its own national protection or even choose to ignore totally terrorism by investing on alternative projects. We also look at the effects of institutions that allow sanctioning and rewarding of other countries to facilitate coordination on deterrence policy. We find that, in absence of institutional incentives and after controlling for risk aversion, most of countries defect by investing very weakly in collective actions against terrorism while largely investing to protect themselves. In contrast, the introduction of punishment/reward incentive systems improves significantly the contribution level to the collective security account.     

和谐社会与我国公共预算资金利益博弈

无论何种政体,在公共预算中都有一定的资金分配方法,各种公共预算资金分配的不同方法的深层原因是不同利益主体在不同的政体要求下对公共预算资金合法博弈的结果,我国公共预算资金分配也不例外.本文从我国公共预算资金分配的现状出发,探讨了我国目前公共预算资金利益博弈的各种具体表现形式及今后需要改进的一些方面,以期在我国逐步建立和谐而文明的小康社会中,在公共预算资金的科学、合理、合法分配的制度化、民主化建设的过程中,提供一些参考依据.     

Punishment,counterpunishment and sanction enforcement in a social dilemma experiment

We present the results of an experiment that explores the sanctioning behavior of individuals who experience a social dilemma. In the game we study, players choose contribution levels to a public good and subsequently have multiple opportunities to reduce the earnings of the other members of the group. The treatments vary in terms of individuals’ opportunities to (a) avenge sanctions that have been directed toward themselves, and (b) punish others’ sanctioning behavior with respect to third parties. We find that individuals do avenge sanctions they have received, and this serves to decrease contribution levels. They also punish those who fail to sanction third parties, but the resulting increase in contributions is smaller than the decrease the avenging of sanctions induces. When there are five rounds of unrestricted sanctioning, contributions and welfare are significantly lower than when only one round of sanctioning opportunities exists, and welfare is lower than at a benchmark of zero cooperation. We thank James Andreoni, participants in seminars at Emory University, the University of Wisconsin-Madison, the University of New South Wales, the University of Sydney, Deakin University, the 2004 North American Regional Meetings of the ESA in Tucson, Arizona, USA, the 2004 IMEBE Meetings in Cordoba, Spain, and the 2005 SAET meetings in Vigo, Spain, for constructive and helpful comments. We thank Elven Priour for programming and organization of the sessions. Instructions for the experiment are available from the authors.     

Voluntary Participation and Provision of Public Goods in Large Finite Economies

We consider a public good provision game with voluntary participation. Agents participating in the game provide a public good and pay the fees according to a mechanism (allocation rule), while nonparticipants can free‐ride on the participants. We examine how the equilibrium public good provision level is affected by enlarging the population of an economy. We introduce a condition for an allocation rule, the asymptotic uniform continuity in replication (AUCR), which requires that small changes in the population must yield only small changes in the public good provision and which is satisfied by many mechanisms. We show that under AUCR, the equilibrium level of the public good converges to zero as the economy is replicated in the sense of Milleron.     

Framing and Misperception in Public Good Experiments

Earlier studies have found that framing has a substantial impact on the degree of cooperation observed in public good experiments. We show that the way the public good game is framed affects misperceptions about the incentives of the game. Moreover, we show that such framing‐induced differences in misperceptions are linked to the framing effect on subjects' cooperation behavior. When we do not control for the different levels of misperceptions between frames, we observe a significant framing effect on subjects' cooperation preferences. However, this framing effect becomes insignificant once we remove subjects who misperceive.     

Truth,Trust, and Sanctions: On Institutional Selection in Sender–Receiver Games*

We have conducted a laboratory experiment to investigate the impact of institutions and institutional choice on truth‐telling and trust in sender–receiver games. We find that in an institution with sanctioning opportunities, receivers sanction predominantly after having trusted lies. Individuals who sanction are responsible for truth‐telling beyond standard equilibrium predictions, and they are more likely to choose the sanctioning institution. Sanctioning and non‐sanctioning institutions coexist if their choice is endogenous, and the former shows a higher level of truth‐telling but lower material payoffs. Our experimental findings are consistent with logit agent quantal response equilibrium with two distinct groups of individuals: one consisting of subjects who experience non‐monetary lying costs as senders and non‐monetary costs when being lied to as receivers, and the other consisting of payoff maximizers.     

UNIVERSALISM AND THE VALUE OF POLITICAL POWER

Although legislatures typically use majority rule to allocate a budget in distributive legislation, unanimous consent over the broad allocation of benefits is pervasive. I develop a game‐theoretic model where members strategically interact in a universal coalition to determine allocations, with noncooperative bargaining as a threat point for the breakdown of cooperation. To quantify the effects of political power on the agreed‐upon allocation, I structurally estimate the model using the “Bridge Bill Capital Budget” in 1992. I find that 16.73% of the budget would be allocated differently if allocations were determined only based on actual needs.     

Inequality, cooperation, and growth: An experimental study

In a three player dynamic public goods experiment, social output today determines production possibilities tomorrow. In each period, players choose to sabotage, to cooperate, or to play best response. Sabotage harms social output and growth. Mutual cooperation maximises both. The property rights to social output are distributed unequally. Extent and skew of inequality are varied. We observe equilibrium play in most cases. There is also substantial cooperation, but little sabotage. Our exogenous variations of inequality are neutral to growth, neither negatively correlated to cooperation, nor positively correlated to sabotage. The neutrality result is shown to be sensitive to the dynamic nature of the employed game.     

Social Conflict and Gradual Political Succession: An Illustrative Model*

This paper studies the evolution of political institutions in the face of conflict. We examine institutional reform in a class of pivotal mechanisms—institutions that behave as if the resulting policy were determined by a “pivotal” decision maker drawn from the potential population of citizens and who holds full policy‐making authority at the time. A rule‐of‐succession describes the process by which pivotal decision makers in period t + 1 are, themselves, chosen by pivotal decision makers in period t. Two sources of conflict—class conflict, arising from differences in wealth, and ideological conflict, arising from differences in preferences—are examined. In each case, we characterize the unique Markov‐perfect equilibrium of the associated dynamic political game, and show that public decision‐making authority evolves monotonically downward in wealth and upward in ideological predisposition toward the public good. We then examine rules‐of‐succession when ideology and wealth exhibit correlation.     

Forming and Dissolving Partnerships in Cooperative Game Situations

A group of players in a cooperative game are partners (e.g., as in the form of a union or a joint ownership) if the prospects for cooperation are restricted such that cooperation with players outside the partnership requires the accept of all the partners. The formation of such partnerships through binding agreements may change the game implying that players could have incentives to manipulate a game by forming or dissolving partnerships. The present paper seeks to explore the existence of allocation rules that are immune to this type of manipulation. An allocation rule that distributes the worth of the grand coalition among players is called partnership formation‐proof if it ensures that it is never jointly profitable for any group of players to form a partnership and partnership dissolution‐proof if no group can ever profit from dissolving a partnership. The paper provides results on the existence of such allocation rules for general classes of games as well as more specific results concerning well‐known allocation rules.     

Public education and redistribution when talents are mismatched

In democratic countries, elected policymakers determine public spending. The level of public spending depends on taxes that are decided by a voting mechanism. Policymakers also decide how to allocate funds among different policies, such as public education and pure redistributive transfers. How are the levels of funding for public education and redistribution determined in the political process? What impacts do votes on these two policies have on inequality, growth and social mobility? We develop a politico-economic model that highlights a novel mechanism: public education provides opportunities for the children of the poor to be recognized for their talent. This reduces the probability of a mismatch, which takes place when individuals with low talent who come from rich families find jobs that should go to people with high talent (and vice versa). Hence, the poor may prefer public spending on education to direct redistribution, while the rich prefer redistribution, as education implies more competition for good jobs from the poor.     

Rewards and Sanctions and the Provision of Public Goods in One-Shot Settings

A burgeoning literature in experimental studies of the Voluntary Contribution Mechanism focuses on the ability of institutions that allow the monitoring, sanctioning, and/or rewarding of others to facilitate cooperation. In this paper rewards and sanctions are examined in a one-shot VCM setting that so far has been unexplored in the literature. The study finds that while some subjects are willing to reward and sanction others at a personal cost, the opportunity to reward or sanction is ineffective in facilitating cooperation relative to previous experiments in which a repeated game environment is employed. The study also compares behavior in an environment in which the imposition of rewards and sanctions is certain to an environment in which imposition is uncertain. The expected value of the reward or sanction is kept constant across environments to focus simply on the effect of uncertainty about imposition. Uncertainty does not change behavior in a significant way, either in the level of cooperation or the willingness of individuals to impose rewards or sanctions.     

Income Shocks,Inequality, and Democracy*

In this paper, motivated by contradictory evidence on the effect of income on democracy, we investigate the hypothesis that it is income shocks – major income fluctuations relative to the trend – rather than marginal year‐on‐year variation in income levels that lead to non‐trivial changes in the quality of political institutions. Empirical results provide support for this hypothesis, and show how income inequality plays a crucial role in the effects of economic shocks on democracy. In particular, negative income shocks reveal a positive effect on democracy in countries with high inequality, and vice versa.