Experiment 7 Public Goods Game
Learning objectives
This experiment is related to contents exposed in unit 4 (Social interactions), unit 12 (Markets, efficiency, and public policy), and unit 20 (Capstone: Economics of the environment). Concepts students may explore are:
Key concepts
- Social dilemma
- Public good
- Free rider
- Social punishment
- Altruism
Introduction
Are humans able to pursue a goal as a whole species instead of blindly following their individual benefit? This question may be followed by hope.
Some situations put individuals in conflict between what a person may want, and what would be best for the group (Unit 4). Public goods are characterized by being non-rival. Therefore, their availability to new people is not reduced by the current use of it (Unit 12.5). Thus, collective contribution to a public good is a clear example of this kind of conflict. In particular, there are individual incentives not to contribute to the good because once it’s available, everyone has access to it (Unit 4.6). Important problems have a similar nature. For instance, pollution and climate change require contributions from the agents to be addressed. However, there are individual incentives not to assume costs of actions against environmental problems because once reduced, the benefits are shared by everyone (Unit 20.9).
This activity presents a classic Public Goods Game. Participants get an endowment. They decide how much to contribute to a public good that will return an equal proportion of the sum of contributions multiplied by a number. Theory proposes that this game has a dominant strategy favoring not to contribute. Experimental evidence shows that contributions tend to decrease through time. However, when people is allowed to punish the free riders, contributions stay relatively constant (Unit 4.7).
