NON‐MONETARY INCENTIVES AND OPPORTUNISTIC BEHAVIOR: EVIDENCE FROM A LABORATORY PUBLIC GOOD GAME

This study reports data from a laboratory experiment that investigates the incentive effect of three distinct social communication schemes on free‐riding behavior. We use performance‐based approval and disapproval ratings and a linear public good game to address the above issues. The treatments vary in terms of subjects' opportunities to anonymously assign (1) only the approval ratings to other group members, (2) only the disapproval ratings to other group members, and (3) either the approval or the disapproval ratings to other group members (but not both to the same group member), after they play a standard linear public good game. Despite the Nash prediction of zero individual contribution in all three treatments, the data show that the disapproval points generate significantly higher contribution than the approval points. The treatment in which subjects could communicate either the approval or the disapproval points produces the highest level of contribution. We discuss the implications that these findings may have for efficient design of organizations. (JEL D03, H41, C72, C92)     

COMPETITION AND COOPERATION IN A PUBLIC GOODS GAME: A FIELD EXPERIMENT

We explore the effects of competitive and cooperative motivations on contributions in a field experiment. A total of 10,000 potential political donors received solicitations referencing past contribution behavior of members of the competing party (competition treatment), the same party (cooperative treatment), or no past contribution information (control). We first theoretically analyze the effect of these treatments on the contribution behavior of agents with different social preferences in a modified intergroup public good (IPG) game. Then, we report the empirical results: Contribution rates in the competitive, cooperative, and control treatments were 1.45%, 1.08%, and 0.78%, respectively. With the exception of one large contribution, the distribution of contributions in the competitive treatment first order stochastically dominates that of the cooperative treatment. Qualitatively, it appears that the cooperative treatment induced more contributions around the common monetary reference point, while the competitive treatment led to more contributions at twice this amount. These results suggest that eliciting competitive rather than cooperative motivations can lead to higher contributions in IPG settings. (JEL D72, H41, C93)     

LIMITS OF THE EFFECT OF SOCIAL INFORMATION ON THE VOLUNTARY PROVISION OF PUBLIC GOODS: EVIDENCE FROM FIELD EXPERIMENTS

Previous work has demonstrated the effect of social information in the voluntary provision of public goods in the field. In this article, we demonstrate the boundary conditions of the effect. We show that when social information is too extreme, it ceases to influence individual contributions. The results highlight a natural limitation of the social information effect, and provide a characterization of the most effective levels for an organization to use. (JEL M31, H41, D64)     

VANISHING LEADERSHIP AND DECLINING RECIPROCITY IN A SEQUENTIAL CONTRIBUTION EXPERIMENT

We examine experimentally how and why voluntary contributions are affected by sequentiality. Instead of deciding simultaneously in each round, subjects are randomly ordered in a sequence which differs from round to round. We compare sessions in which subjects observe the contributions from earlier decisions in each round (“sequential treatment with information”) to sessions in which subjects decide sequentially within rounds, but cannot observe earlier contributions (“sequential treatment without information”). We also investigate whether average contributions are affected by the length of the sequence by varying group size. Our results show that sequentiality alone has no effect on contributions, but that the level of contributions increases when subjects are informed about the contributions of lower‐ranked subjects. We provide evidence that the so‐called “leadership effect” vanishes within rounds, and that group size has no significant impact on the average level of contributions in our sequential contribution games. (JEL C92, H41, D63)     

COMPARING THE EFFECTIVENESS OF REGULATION AND PRO‐SOCIAL EMOTIONS TO ENHANCE COOPERATION: EXPERIMENTAL EVIDENCE FROM FISHING COMMUNITIES IN COLOMBIA

This paper presents the results from a series of framed field experiments conducted in fishing communities off the Caribbean coast of Colombia. The goal is to investigate the relative effectiveness of exogenous regulatory pressure and pro‐social emotions in promoting cooperative behavior in a public goods context. The random public revelation of an individual's contribution and its consequences for the rest of the group leads to significantly higher public good contributions and social welfare than regulatory pressure, even under regulations that are designed to motivate fully efficient contributions. (JEL C93, H41, Q20, Q28)     

CULTURAL IDENTITIES AND RESOLUTION OF SOCIAL DILEMMAS

We report an experiment on payoff-equivalent, sequential provision and appropriation games with high- and low-caste Indian villagers. A central question is whether caste identities affect resolution of social dilemmas. Making caste salient elicits striking changes in behavior compared to baseline treatment with no information about others' castes. Homogenous groups with high caste villagers are more successful in resolving social dilemmas than homogenous groups with low caste villagers. The success of mixed-caste groups is somewhere between, which is inconsistent with a group identity model. Absent salient information on caste, behavior is inconsistent with unconditional social preferences but as predicted by reciprocity. (JEL C93, H41, Z13)     

WHO MAKES A GOOD LEADER? COOPERATIVENESS,OPTIMISM, AND LEADING‐BY‐EXAMPLE

We examine the characteristics of effective leaders in a simple leader‐follower voluntary contributions game. We focus on two factors: the individual's cooperativeness and the individual's beliefs about the cooperativeness of others. We find that groups perform best when led by those who are cooperatively inclined. Partly, this reflects a false consensus effect: cooperative leaders are more optimistic than noncooperators about the cooperativeness of followers. However, cooperative leaders contribute more than noncooperative leaders even after controlling for optimism. We conclude that differing leader contributions by differing types of leader in large part reflects social motivations. (JEL A13, C92, D03)     

DISAPPOINTMENT AVERSION AND SOCIAL COMPARISONS IN A REAL‐EFFORT COMPETITION

We present an experiment to investigate the source of disappointment aversion in a sequential real‐effort competition. Specifically, we study the contribution of social comparison effects to the disappointment aversion previously identified in a two‐person real‐effort competition (Gill, D., and V. Prowse. “A Structural Analysis of Disappointment Aversion in a Real Effort Competition.” American Economic Review, 102, 2012, 469–503). To do this we compare “social” and “asocial” versions of the Gill and Prowse experiment, where the latter treatment removes the scope for social comparisons. If disappointment aversion simply reflects an asymmetric evaluation of losses and gains we would expect it to survive in our asocial treatment. Alternatively, if losing to or winning against another person affects the evaluation of losses/gains, as we show would be theoretically the case under asymmetric inequality aversion, we would expect treatment differences. We find behavior in social and asocial treatments to be similar, suggesting that social comparisons have little impact in this setting. Unlike in Gill and Prowse we do not find evidence of disappointment aversion. (JEL C91, D12, D81, D84)     

LIMITED LIABILITY,MORAL HAZARD,AND RISK TAKING: A SAFETY NET GAME EXPERIMENT

We model the safety net problem as a social dilemma game involving moral hazard, risk taking, and limited liability. The safety net game is compared to both an individual decision task involving full liability and the deterministic public goods game. We report experimental data to show that limited liability leads to higher risk taking in comparison to full liability; nevertheless, the difference is much smaller than predicted by theory. In the safety net game, subjects behave as if socially responsible for the losses they impose on the group. With repetition, nevertheless, a gradual emergence of the moral hazard problem arises. (JEL C9, D7, D8, H4, I1, I3)     

AN EGALITARIAN SYSTEM BREEDS GENEROSITY: THE IMPACT OF REDISTRIBUTION PROCEDURES ON PRO‐SOCIAL BEHAVIOR

In a meritocratic system, people are compensated on the basis of their individual ability, whereas in an egalitarian system people are equally compensated. Essentially, in the latter system high performers are taxed and subsidize underperformers. Would differences in income redistribution procedures affect people's pro‐social behavior? In experiments, we found that people are more generous toward strangers in an egalitarian treatment than in a meritocratic treatment. Interestingly, being taxed does not reduce the generosity of high performers, whereas being subsidized significantly increases the generosity of low performers. (JEL C91, D63, D64)     

MAKING FRIENDS TO INFLUENCE OTHERS: ENTRY AND CONTRIBUTION DECISIONS THAT AFFECT SOCIAL CAPITAL IN AN ASSOCIATION

We examine factors affecting entry and contribution to an association that provides different goods using social capital formed by heterogeneous firms that lobby in a political economy environment. We identify how associations attract the most productive firms or the least productive firms in an industry and explain how such associations differ in their intensive and extensive marginal contributions to social capital. We find that the level of regulatory stringency, association products including capital goods for members or lobbying to influence regulation, and government influenceability affect membership and contribution decisions. These results vary with firm productivity. Often, an increase in government influenceability increases social capital in associations composed of highly productive firms because they prefer to influence policy while less productive firms prefer more association‐produced production inputs. (JEL D71, D73)     

Longitudinal links of parental solicitation,knowledge, and peer approval with deviance during early adolescence

The current study examined growth-to-growth associations of parental solicitation, knowledge, and peer approval with deviance during early adolescence, using a 4-wave, 18-month self-reported longitudinal data set from 570 Czech early adolescents (58.4% female; M_age = 12.43 years, SD = 0.66 at baseline). Unconditional growth model tests provided evidence of significant changes in the three parenting behaviors and in deviance over time. Multivariate growth model tests showed that declines in maternal knowledge were associated with increases in deviance, while greater increases in parental peer approval were associated with slower increases in deviance. Findings provide evidence of dynamic changes in parental solicitation, knowledge, and peer approval over time, as well as in deviance; additionally, they importantly show how parental knowledge and peer approval covary developmentally with deviance.     

LIVING IN TWO NEIGHBORHOODS—SOCIAL INTERACTION EFFECTS IN THE LABORATORY

Field evidence suggests that people belonging to the same group often behave similarly, that is, behavior exhibits social interaction effects. We conduct a laboratory experiment that avoids the identification problem present in the field and allows us to study the behavioral logic of social interaction effects. Our novel design feature is that each subject is simultaneously a member of two randomly assigned and identical groups where only members (“neighbors”) are different. We study behavior in a coordination game with multiple equilibria and a public goods game, which has only one equilibrium in material payoffs. We speak of social interactions if the same subject at the same time makes group‐specific decisions that depend on their respective neighbors' decisions. We find that a majority of subjects exhibit social interaction effects both when the game has multiple equilibria in material payoffs and when it only has one equilibrium. (JEL C91, H41, K42, H26)     

Knitted warmth: the simple analytics of social cohesion

Self-interested agents are randomly matched to play a variant of the prisoners dilemma in which social capital increases the return to mutual cooperation. The stock of society-wide social-capital investments is social cohesion; the rate of return to social-capital investment increases with social cohesion. I derive sufficient conditions for equilibrium cooperation when agents know only the level of social cohesion. In communities, there exists better information and some social standard of behavior that supports equilibrium cooperation. I distinguish between characteristics of individuals and those of populations, and between mechanisms that favor cooperation in low-information “mass society” and in information-rich settings.     

CONTRACT DESIGN AND SELF‐CONTROL WITH ASYMMETRIC INFORMATION

We study optimal contracting by a monopolistic seller of investment goods to a time‐inconsistent consumer and, in doing so, introduce asymmetric information to the model of DellaVigna and Malmendier (2004) . We find (1) the below‐marginal‐cost‐pricing rule may fail for a low‐value consumer; (2) the firm's profit is no longer unaffected by the consumer's short‐run impatience, as the latter is sophisticated. We find that there is an important threshold value of short‐run patience. When the consumer's short‐term patience is below this level, then, as the patience increases, the firm suffers. When the consumer's short‐run patience is above this threshold, then, as it increases, the firm benefits. Finally, we show that unlike monopoly, perfect competition with asymmetric information achieves the first‐best outcome. (JEL D03, D82, D91)     

SLEEPING WITH THE ENEMY: THE ECONOMIC COST OF INTERNAL ENVIRONMENTAL CONFLICTS

This paper extends the literature on collective rent‐seeking by introducing the possibility that a competing group may be a subset of another. We develop a model that incorporates the potential for some individuals to be party of both sides of a conflict, which creates interdependence of payoffs. Results indicate that strategic individual behavior, and the resulting rent dissipation, is affected by the relative size of the groups. We conduct an experimental test of the model and find that observed laboratory behavior corresponds well with the game‐theoretic comparative‐static predictions. (JEL C72, C9, Q5, D74)     

BEHAVIORAL PATTERNS IN SOCIAL NETWORKS

In this article, we focus on the analysis of individual decision‐making for the formation of social networks, using experimentally generated data. We analyze the determinants of the individual demand for links under the assumption of agents' static expectations and identify patterns of behavior that correspond to three specific objectives: players propose links so as to maximize expected profits (myopic best response strategy); players attempt to establish the largest number of direct links (reciprocator strategy); and players maximize expected profits per direct link (opportunistic strategy). These strategies explain approximately 74% of the observed choices. We demonstrate that they are deliberately adopted and, by means of a finite mixture model, well identified and separated in our sample. (JEL C33, C35, C90, D85)     

PRIZE SCARCITY AND OVERDISSIPATION IN ALL‐PAY AUCTIONS

We compare bidding behavior in complete information all‐pay auction experiments that vary in the prizes and number of players. We confirm the observation from prior single‐prize experiments that there is overbidding relative to equilibrium predictions. Our primary results are that increasing the number of prizes and players proportionally does not reduce overbidding but increasing the number of prizes with a fixed number of players eliminates overbidding. We conclude that the overbidding phenomenon is related to the scarcity of the prize. We provide new theoretical results on the multi‐prize logit equilibrium, and our experimental results are qualitatively consistent with logit equilibrium predictions. (JEL D72, D91, C91, D44)     

PEER PRESSURE: EXPERIMENTAL EVIDENCE FROM RESTROOM BEHAVIOR

We provide experimental evidence on the effect of peer pressure on individual behavior. Specifically, we study the effect of being exposed to an observer in a public restroom on handwashing and urinal flushing behavior. Our estimates show that being exposed to an observer increases the probability of handwashing by 13 percentage points and the probability of urinal flushing by 15 percentage points. Given that handwashing and urinal flushing have social benefits that exceed individual benefits, our findings provide support for peer pressure as an additional way of addressing the social suboptimality arising from externalities. (JEL C91, C93)