In this paper we replicate and extend the experiment of Fehr and Gaechter (2000) that analyzes the effect of an opportunity to punish others on the level contributions in the Voluntary Contributions Mechanism. The punishment is costly for both the players distributing and those receiving the punishment. Like Fehr and Gaechter, we find that agents often engage in noncredible costly punishment behavior in order to reduce earnings of others who contribute low amounts to the public good. The availability of punishment increases average contributions sharply. Here, we also introduce a second treatment, identical to the first treatment, except that the "punishment" is non-monetary. The assignment of "non-monetary" punishment points does not reduce the payoff of any agent, but it can be used to register disapproval of others' contribution levels. We find that the existence of the possibility of "non-monetary" punishment alone increases the average level of contributions and earnings, though by less than the monetary punishment. This suggests that the increase in cooperation observed by Fehr and Gaechter is not only due to the possibility of monetary penalties, but also from the opportunity of others to express their disapproval of free riding behavior.
We employ an experimental approach to consider the impact of a combination of formal and informal sanctions on contribution levels for a specific type of public good. We find that when both sanctions are available, contributions and overall welfare are higher than when only one of the two sanctioning systems is available. The availability of an array of sanctions of varying severity appears to enhance welfare. (JEL C92) 1. Coleman (1990) characterizes this situation as the existence of demand for a behavioral norm. See Elster (1989) for a discussion of the origins and benefits of social norms.2. Several economic models have investigated the consequences of social pressure on economic behavior. See, for example, Akerlof (1980) and Lindbeck et al. (1999). Elster (1989 distinguishes between guilt, an internal type of pressure and shame, an external type of social pressure, as forces promoting prosocial behavior. Labor economists, such as Kandel and Lazear (1992) and Barron and Gjerde (1997), have modeled the effect of peer pressure on team output.
Pervasive overbidding represents a well-documented feature of all-pay auctions. Aggregate bids exceed Nash predictions in laboratory experiments, and individuals often submit bids that guarantee negative profits. This paper examines three factors that may reduce pervasive overbidding: (a) repetition (experience), (b) reputation (strangers vs. partners) and (c) active participation. We find that aggregate over-dissipation diminishes but is not eliminated with repetition, and that repetition, in conjunction with active participation generates bids consistent with the static Nash predictions.
We construct asset markets of the type studied in Smith et al . (1988), in which price bubbles and crashes are widely observed. In addition to a spot market, there are futures markets in operation, one maturing at the beginning of each period of the life of the asset. We find that when futures markets are present, bubbles do not occur in the spot markets. The futures markets seem to reduce the speculation and the decision errors that appear to give rise to price bubbles in experimental asset markets.
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The authors conduct an experiment to explore whether contributions to a public good increase when public observation of contribution decisions is possible and whether any such increase is durable and transferable. Rege and Telle (2004) find that in one-shot games, public observation of all individuals' contribution decisions leads to higher contributions than would occur in the absence of such observation. In this study, the authors argue that public observation is ineffective in increasing contributions in a repeated game. Indeed, it actually reduces contribution rates relative to a treatment in which contribution decisions are not observable. Furthermore, prior experience with public observability reduces cooperative behavior in subsequent interaction in which decisions cannot be observed. The authors conjecture that approval incentives are more effective in leading to cooperative behavior when sanctioned parties are unable to avoid the expressions of disapproval they receive.
A substantial literature in behavioural science and psychology shows that emotions affect human choices and values. This paper investigates whether such emotional impacts are also present in stated choice experiments for environmental goods. If this were so, it would introduce an additional element of context dependence to the welfare measures derived from such methods, and would be at odds with the rational choice model underlying welfare economics. A laboratory experiment using three different emotion treatments was combined with a stated preference choice experiment concerned with changes in coastal water quality and fish populations in New Zealand. No statistically significant effects of changes in emotional state on estimated preference parameters, willingness to pay or the randomness of choices were found. The paper concludes by questioning, why such a contrast exists with empirical findings in behavioural science
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