Teaching Public Goods and Free Riding Using a Classroom Experiment

Victoria UmanskayaOccidental College

11th Annual Economics Teaching Conference

The costs of including classroom experiments in your lesson plans

– Fixed cost: the time used outside the classroom on developing games for multiple courses

–Variable cost: necessary resources and the time used inside the classroom

A perfect classroom experiment

• Provides students with incentives to reveal their true economic behavior– A game with real, not hypothetical payoffs

• Can be conducted at a low (variable) cost:– Easy set up, transparent instructions– Doesn’t take up much class time, can be shortened or

extended if needed– Hand run, doesn’t require special resources

• Versatile (lower average fixed cost): – Can be used in classes of different size and level with only

slight modifications

Public goods and free-riding: a classroom experiment

• Each of the players starts with 5 dollars (or points)• You can contribute any amount from 0 to 5 to the

“matching fund”: I will double the total contributions to this fund

• I will then divide the doubled amount equally among all the players regardless of their contribution or the lack thereof.

• Your payoff = Dollars left from the initial $5 + Your share of the “matching fund”

Public goods and free-riding: experiment instructions

• We’ll play several rounds. Every round is a new game so you start every round with the new endowment of $5.

• In each round, you’ll be asked to report your contribution to the matching fund. You can either respond at PollEv.com/vumanskaya or text VUMANSKAYA to 37607 once to join, then text in each round A for 5 points, B for 4 points, C for 3 points, D for 2 points, E for 1 point, F for 0 points.

Public goods and free-riding: experiment results

ROUND TOTAL CONTRIBUTIONS YOUR SHARE OF MATCHING FUND

1

2

3

4

5

6

7

8

Possible discussion points

• Free-riding and inefficient provision of public goods:– Did anyone start by contributing all 5 points? Why?– Did anyone start by contributing 0 points? Why?

• Possibility of cooperation and the repeated nature of the game

• The effect of the “provision points” on the level of contributions

Afterthoughts: real payoffs

• The next best thing after actual dollars are grades!

• Students play for bonus points added to their assignment or test scores.

Afterthoughts: versatility• ECON 101: play a single round, only discuss free-riding and under-

provision of public goods in a free market. Larger class, students play in groups.

• Environmental Economics: multiple rounds with changing settings; frame the discussion in terms of environmental quality. Smaller class, each students plays for him/herself.

• Intermediate Micro: repeated games, changing settings. Discuss the nature of public goods, Nash equilibrium, one shot vs. repeated game, trigger strategies.

• Public Economics, Game theory?

Afterthoughts: low costs

• No resources, the length of the game can be easily adjusted.

• To find total contributions in each round and record results (bonus points):– ECON 101: fewer players (groups), one round use

white boards, take pictures to record each group’s contribution

– Upper-division classes: more players, multiple rounds use PollEverywhere and record sheet if using a free version