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Voluntary Contributions with Imperfect Information Annamaria Fiore University of Bari

Voluntary Contributions with Imperfect Information Annamaria Fiore University of Bari M. Vittoria Levati Andrea Morone MPI of Economics, Jena University of Bari University of Bari. Motivation.

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Voluntary Contributions with Imperfect Information Annamaria Fiore University of Bari

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  1. Voluntary Contributions with Imperfect Information Annamaria Fiore University of Bari M. Vittoria Levati Andrea Morone MPI of Economics, Jena University of Bari University of Bari ESA World Meeting 2007

  2. Motivation • to examine the effect of incomplete information on contribution levels • two-person linear voluntary contribution mechanism with stochastic marginal benefits from the public good • most previous experimental studies performed in an extremely rich informational environment Yet,in real life, one hardly knows in advance the marginal benefit she can derive from a public good she is asked to finance ESA World Meeting 2007

  3. Hipothesis • A severe lack of information may lower individuals’ willingness to contribute (Bagnoli and Lipman, 1989, “complete information […] is a very strong assumption […]. Incomplete information may lead to underprovision, p. 585) • to establish a relationship between attitude to risk and willingness to contribute (Ledyard, 1995, p. 143) ESA World Meeting 2007

  4. Experiment • Two treatments: • PERFECT INFO • IMPERFECT INFO • Between design • 32 participants in each treatment • Computerized (Ztree, Fischbacher, 1999) • Subject pool: students in Economics – recruitment: ORSEE software (Greiner, 2004) • Lab at MPI, Jena, Germany, on February 2005 • 2 stages: • 1° stage: Vickrey auction • 2° stage: public goods game & belief elicitation • Currency: ECU (10 ECU = 1€) • Average payoff: 11.7€ per un’ora e mezzo ESA World Meeting 2007

  5. Results (1/4) • The difference in contribution decisions between treatments is remarkable and significant (two-sided Wilcoxon rank-sum tests - based on averages over players for each pair as independent unit of observation – p<0.001 in each of the first nine periods; p=.92 in period 10; N = 16; p=.001; N = 16 averaging over all periods). ESA World Meeting 2007

  6. Results (2/4) • 1° period: independent obs. • individual contributions and individual beliefs: highly significantly correlated (Spearman rank correlation coefficients are 0.83 in PERFECT INFO, and 0.80 in IMPERFECT INFO in each treatment) • a statistically significant difference in first-period beliefs between treatments (one-tailed Wilcoxon rank-sum test: p-value = .004, N = 32). No participant is expected to free-ride under perfect information, whereas 6 subjects hold free-riding expectations under imperfect information. ESA World Meeting 2007

  7. Results (3/4) • beliefs in all periods following the first: endogenous • correlation analysis between beliefs in period t about the partner’s contribution in t and the actual contribution of the partner in period (Spearman rank correlation coefficients: PERFECT INFO = .92 IMPERFECT INFO = .98, p-value < .001, N = 16) ESA World Meeting 2007

  8. Relationship risk attitude/willingness to contribute (4/4) ESA World Meeting 2007

  9. Conclusion • Evidence for the impact of imperfect information on voluntary contribution behavior in linear public goods games, and for the relationship between risk attitudes and willingness to cooperate • Linear voluntary contribution mechanism: efficient? • Political economy perspective: individuals provided with a good knowledge about their marginal benefits if requested to contribute ESA World Meeting 2007

  10. Thanks for your attention! Annamaria Fiore University of Bari afiore@dse.uniba.it ESA World Meeting 2007

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