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)
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:
Basic Insight If, then as n increases V i = MPCR (marginal per capital return) drops. So it is unclear whether group size effect is due to changes in V i = MPCR or changes in group size n.
Three Possible Treatments The effect of altering MPCR but holding n constant The effect of altering n but adjusting G(.) function so that MPCR remains constant The combination effect in which altering n also altering MPCR.
Experimental Design
Experimental Procedure Participants faced two consecutive series of ten decision trials. In one series, MPCR was 0.3 and in another MPCR was Order was switched to counterbalance. 12 experimental sessions.
Basic Results: % of Strong Free Riders A person is called a strong free rider if her contribution to public good is less than 1/3 of her tokens Data from second series
Basic Results: % of Tokens Contributed Data from second series
End-Period Results Data from second series
Key Observations Observation 1: Lowering the MPCR from 0.75 to 0.3 appears to increase significantly the incidence of free- rider behavior. Observation 2: There are weak, if any, effects of changes in group size from four to ten (holding MPCR constant)
Intragroup Comparison I: Small Groups
Intragroup Comparison II: Small Groups
Combined Effect: Previous Experiment MPCR and Group Size
Summary