Motivation Experiment Evidence Conclusions References
Partners, Strangers and Free RidersAn Experimental Study on the Importance of Group
Composition for Linear Public Goods Games
Matheus Albergaria de Magalhães*Edvan Soares de Oliveira*
*FUCAPE Business School
Quinto Encontro de Economia do Espírito Santo (V EEES)
FUCAPE Business School, Vitória (ES)
November 3-4, 2014
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
SECTIONS
Motivation
Experiment
Evidence
Conclusions
References
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
MOTIVATION
I Pure Public Goods: non-rival and non-exclusive .
I A few examples:
I Lighthouses (Classic Example).
I National Defense.
I Organizational Knowledge.
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
MOTIVATION
Examples of Public Goods
Lighthouse National Security
Source: Google Images (https://www.google.com/imghp).
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
MOTIVATION
Main Challenges:
I Will people take part in collective actions involving publicgoods?
I Will individual actions lead to socially efficient results?
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
MOTIVATION
Andreoni (1988) reported three consistent results forpublic-goods experiments:
1. No significant evidence of free riding in single-shot games.
2. In experiments involving repeated play, subjects’provisions for public goods tended to decay.
3. Exact free riding was seldom realized.
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
MOTIVATION
Table 1Marwell and Ames’ (1981) Summary of 12 Different Experiments
Source: Marwell and Ames (1981, Table 2, p.307).Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
MOTIVATION
My goals today:
I Describe a simple experiment, related to the provision ofpublic goods.
I Evaluate the importance of random rematching for linearpublic goods games.
I Propose future research agenda for related themes.
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EXPERIMENT
The Experiment:
1. We ran five-round experiments in a Business School(Accounting, Business, Economics and MBA students).
2. Subjects filled a form deciding how to divide R$ 100between a private and a public good.
3. For each R$ 1.00 invested in the private good, subjectswould receive R$ 1.00.
4. For each R$ 1.00 invested in the public good, subjectswould receive R$ 0.50.
5. Subjects were divided in two groups: (i) ’Partners’ (fixedcomposition); (ii) ’Strangers’ (random composition).
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EXPERIMENT
A Linear Public Goods Game
Individuals were given a budget (m), which could be investedeither in a private (x) or public good (g), with x + g = m.
Individual payoffs (Pi) were determined by the followingformula:
Pi = xi + α
n∑j=1
gj (1)
where n was the number of group members. The parameter αwas chosen such that 0 < α < 1.
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EXPERIMENT
A Linear Public Goods Game
Given the above game, we may have the following payoffs:
I Investing R$ 1.00 in the public good has a private return ofR$ 0.50..
I ..while it has a social return of R$ 2.50.
I It is Pareto efficient for subjects to invest all of their moneyin the public good..
I ..but, since the private good’s return exceeds the returnfrom the public good, the Nash equilibrium of this game isto invest zero in the public good (free ride).
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EXPERIMENTA Linear Public Goods Game
Two main hypotheses related to Random Rematching:
1. ‘Learning Hypothesis’: subjects may not immediatelyunderstand the incentives of the game, but after a fewrounds, they start learning (free riding behavior increases).
2. ‘Strategies Hypothesis’: subjects believe all other subjectsbehave rationally in an incomplete information version ofthe Prisoner’s Dilemma.
Under the ‘Strategies Hypothesis’, we expect that giving by‘partners’ will be greater than giving by ‘strangers’.
On the other hand, as the game approaches the end, we canexpect both ‘partners’ and ‘strangers’ to free ride.
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EVIDENCE
Table 2Descriptive Statistics
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EVIDENCE
Table 3Free Rider Index (FRI), 5-Round Experiments
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EVIDENCE
Graph 1Free Rider Index (FRI), 5-Round Experiments
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EVIDENCE
Table 4Percentage of Free Riders in Each Round
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EVIDENCE
Graph 2Percentage of Free Riders (Partners)
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EVIDENCE
Graph 3Percentage of Free Riders (Strangers)
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EVIDENCE
Graph 4Contributions to Public Goods Provision, 5-Round Experiments
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
EVIDENCE
Table 5Econometric Estimations
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
CONCLUSIONS
I Main result: ’Strangers’ tended to cooperate more often than’Partners’.
I Other authors reported the same result (Andreoni and Croson2008).
I Our results suggest that random rematching can play animportant role in explaining the evolution of cooperation.
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
CONCLUSIONS
Future research should concentrate on experiments with thefollowing features:
I Longer periods (10 or 20 rounds) (Andreoni 1988).
I Restarting dates (Andreoni and Croson 2008).
I No communication among subjects.
I Complementarities between the laboratory and the field(Fehr and Leibbrandt 2011).
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
REFERENCES
ANDREONI, J. Why free ride? Strategies and learning in public goodsexperiments. Journal of Public Economics, v.37, n.3, p. 291-304, 1988.
ANDREONI, J.; CROSON, R. Partners versus strangers: random rematchingin public goods experiments. In: PLOTT, C.R.; SMITH, V.L. (Eds.). Handbookof Experimental Economics Results, v.1. Amsterdam: North-Holland, 2008,p.776-783.
FEHR, E.; LEIBBRANDT, A. A field study on cooperativeness and impatiencein the Tragedy of the Commons. Journal of Public Economics, v.95, n.9-10,p.1144-1155, 2011.
MARWELL, G.; AMES, R.E. Economists free ride, does anyone else?Experiments on the provision of public goods. Journal of Public Economics,v.4, n.15, p.295-310, 1981.
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders
Motivation Experiment Evidence Conclusions References
Thank YouMatheus Albergaria de Magalhães
http://www.sites.google.com/site/malbergariademagalhaes
Matheus Albergaria de Magalhães
Partners, Strangers and Free Riders