Motivation

This experiment was a public good experiment to see if groups contribute differently than individuals.

intermediate social structure

This is an area which has had relatively little if any attention in the experimental economic literature.

It also has a practical aspect example how regional trade agreements affects contributions to reductions

in pollution as oppose to individual countries.

Literature ReviewPG experiment: group competition

field PG experiment: (Starmer)

social capital: references from Putnam (Julian)

all papers (and ours): no enforcement/punishment mechanism, not reflected in payoff structure purely psychological

There is a general pattern found in public contribution games that between 40 -50% in period 1 and thereafter it decreases, with the number of repetitions, towards the free riding level. The final trial is always the lowest but is typically is still above the free riding level even though the game is finished.(Isaac, Walker and Williams 1994,Gachter and Renner 2003 and Gachter, Thoni and Herrmann 2008)

The literature tried to solve the puzzle as to why people contribute towards the good without contributing the full amount.

The social comparison theory emphasizes that people in group settings behave differently than in isolation. In particular, it assumes that people are motivated both to perceive and present themselves in a socially desirable way. To accomplish this, a person might react in a way that is closer to what he regards as the social norm than how he would act in isolation. (Levinger and Schneider, 1969)

Literature Review• Psychological effects: Group identification,

Insider/Outsider-effects – while the former would presumably lead to higher contribution (achieve a socially optimal outcome), the latter might rather decrease average contributions.

•Social capital: although trust is only one of several theoretical elements of social capital, it is most effectively build by experiencing interaction in social networks. Since the public good game requires trust in the action of others to achieve a social optimal outcome, this should increase average contributions.

• Shaun P. Hargreaves Heap and Daniel John Zizzo 2006.

Literature Review

• The psychological effect and social capital Overall, the welfare effects of groups are at best neutral and could be negative Shaun (P. Hargreaves Heap and Daniel John Zizzo 2006)

• George A. Akerlof and Rachel E. Kranton (2000), for instance, suggest that simply being able to identify with a group is itself an important source of individual well-being.

This is principally what we shall try to analyse.

DesignH0: there are no differences in behavior due to the intermediate group structure.H1: there are differences…

Design

IG GI

Preference control / repetition bias

PSYCHOLOGICAL GROUP EFFECT

Individual decision

Group decision

Group decision

Individual decision

Repetition control / preference bias

Preference control / repetition bias Revelation Revelation

Payoffs

RevelationRevelation

Design – put on other slide

Repetition bias

Changing beliefs about others' contributions

(Imperfect) conditional cooperation

(Gaechter paper)

Lack of enforcement/ punishment

Declining contributions

Preference bias

Unequal distribution of free riding / conditional cooperation / social

preferences between groups

Confunding group effect with heterogenous

preferences

Results (between treatments)

Results (stage 1)

• Higher mean for individual setting (3.78) than for group setting (2.33)

• Strong clustering of group contributions, almost uniform contribution of individual contributions

• No significant difference in distributions (Mann-Whitney)

Results (within treatment)

Results (within IG)

• Average contributions:– Overall: 3.61– Individual: 3.78– Group: 3.44

• No significant difference

Results (within treatment)

Results (within GI)

• Average contributions:– Overall: 1.83– Individual: 1.33– Group: 2.33

• No significant difference

Results: Additional remarks

• Weakly significant mean-difference across treatment groups (t = -1.64) heterogenous preference bias?

• Weakly significant difference of individual contribution across treatments in the individual setting (z = -1.81) preference and repetition bias?

Conclusion• Limitations:

– subject knew each other, were familiar with experimental design and game theoretic prediction

– small sample size (preference bias)– Resources not sufficient to investigate further

group effects

• No significant differences between group/individual contributions

• Slight hint of repetition bias: across-treatment comparison more meaningful

Literature Review

Andreoni 1988 runs a PG game to try to solve the puzzle. Finds neither the learning hypothesis or a rational strategy can explain the puzzle.

• Fehr and Schmidt 1999 model Inequality aversion people resist inequitable outcomes meaning they are willing to give up some material payoff to move in a direction of more equitable outcomes.

• This has lead to beliefs that people get utility from the fact others are benefitting ‘warm glow’.

Literature Review 

The social comparison theory emphasizes that people in group settings behave differently than in isolation. In particular, it assumes that people

are motivated both to perceive and present themselves in a socially desirable way. To accomplish this, a person might react in a way that is closer to what he regards as the social norm than how he would act in

isolation. (Levinger and Schneider, 1969)

The persuasive argument theory, deliberation drives group decisions in a particular direction because it is more persuasive. A related

explanation of group shifts is that people with certain preferences tend to be more persuasive than others (for example, more selfish

individuals are also more aggressive in deliberation).

(Burnstein et al., 1973; Brown, 1974)

Results (between treatments)

Results (stage 2)

• Group mean (3.44) higher individual mean (1.33)

• Strong clustering of individual contributions around 0, rather uniform group contributions

• Weakly significant (10 %-level) difference in distributions (Mann-Whitney)