Experimental Economics

, Volume 17, Issue 3, pp 439–460 | Cite as

Favor trading in public good provision

Original Paper

Abstract

Favor trading is common. We do something nice for someone and they do something nice in return. Several motives might underlie such behavior, including altruism, strategic motives, and direct or indirect positive reciprocity. It is not yet well-understood how these fit together to affect behavior, how they interact in various institutional structures, and how they play out over time. We use a laboratory experiment to study the elements and dynamics of favor trading in a particular setting: the private provision of a public good. In our experiment, giving subjects the ability to practice targeted reciprocity by making a simple, low-cost change in information provision increases contributions to the public good by 14 %. Subjects reward group members who have previously been generous to them and withhold rewards from ungenerous group members. Strategic concerns cannot explain all of this behavior, and it must be at least partly due to direct reciprocity. When someone cannot directly benefit from favor trading, he gives much less to the public good. People thus excluded from the “circle of reciprocity” provide a clean and strict test of indirect reciprocity. Contrary to previous studies in the literature, we do not observe indirect reciprocity.

Keywords

Public goods Direct and indirect reciprocity Experiment Peer-to-peer fundraising 

JEL Classification

C92 H41 D01 

Supplementary material

10683_2013_9377_MOESM1_ESM.docx (1.1 mb)
(DOCX 1.1 MB)

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Copyright information

© Economic Science Association 2013

Authors and Affiliations

  1. 1.Department of EconomicsWilliams CollegeWilliamstownUSA
  2. 2.Interdisciplinary Center for Economic Science (ICES)George Mason UniversityFairfaxUSA

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