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Outline

Outline. In-Class Experiment on the Provision of Public Good Test of Free-Rider Hypothesis I: Marwell and Ames (1979) Test of Free-Rider Hypothesis II: Marwell and Ames (1980) Test of Free-Rider Hypothesis III: Issac and Walker (1988). Public Good Experiments.

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Outline

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  1. Outline • In-Class Experiment on the Provision of Public Good • Test of Free-Rider Hypothesis I: Marwell and Ames (1979) • Test of Free-Rider Hypothesis II: Marwell and Ames (1980) • Test of Free-Rider Hypothesis III: Issac and Walker (1988)

  2. Public Good Experiments • Individual endowment is and n individuals in a group • Invest in Private and Public exchanges: • i’s returns from Private and Public exchanges are: • Individual’s utility function:

  3. Basic Insight • If , then as n increases Vi = MPCR (marginal per capital return) drops. • So it is unclear whether group size effect is due to changes in Vi =MPCR or changes in group size n.

  4. Three Possible Treatments • The effect of altering MPCR but holding n constant • The effect of altering n but adjusting G(.) function so that MPCR remains constant • The combination effect in which altering n also altering MPCR.

  5. Experimental Design

  6. Experimental Procedure • Participants faced two consecutive series of ten decision trials. • In one series, MPCR was 0.3 and in another MPCR was 0.75. Order was switched to counterbalance. • 12 experimental sessions.

  7. Basic Results:% of Strong Free Riders Data from second series A person is called a strong free rider if her contribution to public good is less than 1/3 of her tokens

  8. Basic Results: % of Tokens Contributed Data from second series

  9. End-Period Results Data from second series

  10. Key Observations • Observation 1: Lowering the MPCR from 0.75 to 0.3 appears to increase significantly the incidence of free-rider behavior. • Observation 2: There are weak, if any, effects of changes in group size from four to ten (holding MPCR constant)

  11. Intragroup Comparison I: Small Groups

  12. Intragroup Comparison II: Small Groups

  13. Combined Effect: Previous Experiment MPCR and Group Size

  14. Summary

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