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. Robustness Tests  Existence of Provision Point (Yes  No)  High Stakes (one token = 1 cents  one token = 5 cents)  Experienced Subjects (No experience  One-time experience)

4. Provision Point

5. The Public Exchange’s Return Function

6. Problem with the Design  Still contains multiple Nash equilibria

7. Results

8. Stake Size  Replicate only the condition (“equal resources, equal interest”) in the no provision point study but increase the stake by five-fold.  24 subjects were run by two new experimenters  32 subjects were run by the old experimenters  There was an “experimenter effect”.

9. Results * Significantly different if the data were combined.

10. Experience  32 subjects from Study I participated in Study III.  Payoff was raised to 2 cents per token to control for inflation.

11. Results

12. Summary