Seminar Series: Behavioural economics, Dr Karen Hauge

On Wednesday, 4th October @ 11am – 12, DART will be welcoming Dr. Karen Hauge to present her current research in the field of behavioural economics. Below is a snippet of her presentation, if you wish to attend please contact us directly for further details, places are limited.

Title: The Good, the Bad, and the Conditional: Sorting and Dynamics in a Public Good Game with Endogenous Group Formation

Authors: Kjell Arne Brekke, Karen Evelyn Hauge, Jo Thori Lind and Karine Nyborg

Abstract: Previous research has shown that beneficiary commitments can serve as a screening device in public good games (Brekke et al., 2011), enabling cooperative subjects to endogenously self-select into groups which manage to sustain cooperation over time.

We present a public good game experiment in which subjects choose between two group types: in blue groups, subjects receive a fixed extra payoff; in red groups, this extra payoff is donated, instead, to the Red Cross. We use the strategy method to elicit the conditional contribution preferences of the subjects; altruist, free-rider, conditional cooperator or other. In the current paper we investigate further why red groups manage to sustain cooperation over time while blue groups do not. Is it because red groups start off at higher contribution levels, or do subjects who select into blue groups condition their contributions more strongly on the behavior of other group members than subjects who select into red groups?

The preliminary results show that subjects who later choose red groups contribute higher amounts in the first one shot public good game in comparison to subjects who later choose blue groups. We find (as in Fischbacher et al. (2001)) that a small group of subjects can be classified as altruists and a small group as free-riders, while the largest group are conditional cooperators. While the altruists select into red groups, the free-riders select into blue groups. The most part of the selection is driven by a small number of subjects, but this selection is important for the dynamics of play.

References

BREKKE, K. A., HAUGE, K. E., LIND, J. T. & NYBORG, K. 2011. Playing with the good guys. A public good game with endogenous group formation. Journal of Public Economics, 95, 1111-1118.

FISCHBACHER, U., G\”{A}CHTER, S. & FEHR, E. 2001. Are people conditionally cooperative? Evidence from a public goods experiment. Economic Letters, 71, 397-404.

 

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