Private costs and public benefits: unraveling the effects of altruism and noisy behavior

Abstract

An increase in the common marginal value of a public good has two effects: it increases the benefit of a contribution to others, and it reduces the net cost of making a contribution. These two effects can be decomposed by letting a contribution have an 'internal' return for oneself that differs from the 'external' return to someone else. We use this framework in a series of one-shot public goods games in which subjects make choices in ten treatments with no feedback. Contributions are generally increasing in the external return and group size, which suggests that altruism in this context is not simply of the 'warm glow' variety, i.e. giving only for the sake of giving. Contributions are also increasing in the internal return, indicating that decisions are sensitive to the costs of helping others. We specify a logit equilibrium model in which individuals are motivated by own and others' earnings, and in which choice is stochastic. Maximum likelihood estimates of (representative-agent) altruism and logit parameters are significant and of reasonable magnitudes, and the resulting two-parameter model tracks the pattern of contributions across the ten treatments. A richer model reveals some differences in individual altruism coefficients, with more dispersion among male subjects.

Paradoxes and mechanisms for choice under risk

“…Use of PAS is a good choice if the data analysis assumes that subjects are playing a repeated game or if repeated game effects inherent in multiple rounds is effectively controlled. Goeree et al (2002) report an experiment in which subjects make 10 VCM decisions (involving different internal and external marginal return rates) without feedback. PORnp was used for payoff from the VCM rounds.…”

Cooperation in small groups: the effect of group size

“…We also report the average contributions as a percentage of endowments and levels of statistical significance. 5 With the exception of Goeree et al (2002) who use one-shot games, all studies use repeated VCM games. In most studies group composition does not change across periods (partners matching protocol).…”

“…Group size effects are studied by varying the number of players matched in a group. In all studies group sizes are varied in a between-subject design, except in Goeree et al (2002) who use a within-subject design. Most studies have investigated group size effects using groups of 4 or more players.…”

“…Most studies have investigated group size effects using groups of 4 or more players. An exception is Goeree et al (2002) who compare groups with 2 and 4 players. 6 Most studies report a positive effect of group size on cooperation.…”

Cooperative Equilibria in Iterated Social Dilemmas

“…These experiments, typically conducted on the fundamental social dilemmas such as the Prisoner's dilemma, the Traveler's dilemma, and the Public Goods game, have shown that cooperation between players (associated with the deviation from the unique, but inefficient, Nash equilibrium) is frequent, and appears to depend on both the game parameters and the environment in which the game is played. In particular, it has been observed that the rate of cooperation in the Traveler's dilemma depends on the bonus/penalty value, whenever the game is single-shot or iterated [7], [12]; the rate of cooperation in the Prisoner's dilemma depends on the payoff parameters or the way the players are matched to play together [11], [32]; and the rate of cooperation in the Public Goods game depends on the marginal return or on the frequency of interaction between free-riders and cooperators [13], [14] [17].…”