The impact of redistribution mechanisms in the vote with the wallet game: experimental results

Abstract

We use the vote-with-the-wallet game to model socially or environmentally responsible consumption, an increasingly relevant but still under-researched phenomenon. Based on a theoretical model outlining game equilibria and the parametric interval of the related multiplayer prisoners’ dilemma we evaluate with a controlled lab experiment players’ behaviour in the game and test the effects of an ex post redistribution mechanism between defectors and cooperators. Our findings document that the redistribution mechanism interrupts cooperation decay and stabilizes the share of cooperators at a level significantly higher, even though inferior to the Nash equilibrium.

This is a preview of subscription content, log in to check access.

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Notes

  1. 1.

    The Boston Consulting Group (2014), “When Social Responsibility Leads to Growth: An Imperative for Consumer Companies to Go Green”. Downloadable at http://us5.campaign-archive2.com/?u=a102a1f840f67f04e25a7fc97&id=b8f2d07db0.

  2. 2.

    Fehr and Gächter (2000) document that their decentralized punishment mechanism has a large impact on cooperation in a public good game. Several contributions extend their work in various directions focusing on nonpecuniary sanctions (Masclet et al. 2003; Noussair and Tucker 2005), effectiveness of punishment (Nikiforakis and Normann 2008) and the price of punishment (Anderson and Putterman 2006; Carpenter 2007).

  3. 3.

    The case for a EU VAT reform in this direction is strongly supported by Albrecht (2006). Along this line Marconi (2010) shows that in a two-country general equilibrium model with endogenous growth and trade a unilateral green consumption tax changes demand patterns and increases technological progress in direction of pollution abatement in both countries. A more specific application of a green consumption tax is proposed by Säll and Gren (2012) who calculate that the introduction of the latter on meat could decrease emissions of greenhouse gas, nitrogen, phosphorus and ammonia by a significant amount.

  4. 4.

    Eurosif (2014), “European SRI Study 2014”. Downloadable at http://www.eurosif.org/our-work/research/sri/european-sri-study-2014/.

  5. 5.

    For the literature on the economic impact of fair-trade see, among others, LeClair (2002), Becchetti et al. (2014), Maseland and Vaal (2002), Moore (2004), Hayes (2006), and Redfern and Snedker (2002).

  6. 6.

    Fair-trade annual impact report 2013–14.

  7. 7.

    Wason (2005, October 7th), “Nestle introduces fairtrade coffee, eco-friendly product goes mainstream”, Mongabay.com. Downloadable at http://news.mongabay.com/2005/1007-reuters.html.

  8. 8.

    Gunther (2010, October 25th), “Ben & Jerry announces big move into fair trade”, Mother Nature Network. Downloadable at http://www.mnn.com/earth-matters/wilderness-resources/blogs/ben-jerry-announces-big-move-into-fair-trade.

  9. 9.

    Mars (2011, September), “Mars and Fairtrade International announce collaboration”. Downloadable at http://www.mars.com/global/press-center/press-list/news-releases.aspx?SiteId=94&Id=3182.

  10. 10.

    Nieburg (2014, March 20th), “Ferrero makes Fairtrade cocoa commitment after rule change”, Confectionery news. Downloadable at http://www.confectionerynews.com/Commodities/Ferrero-makes-Fairtrade-cocoa-commitment-after-rule-change.

  11. 11.

    Said in other terms this implies that only players without income constraints (income at least equal or above the full cost of the responsible product) can participate to the game.

  12. 12.

    For a specific description of the two frames see “ESM Appendix 1”.

  13. 13.

    Players’ endowment do not make any difference between the two choices and are omitted for simplicity.

  14. 14.

    For further details on the socio-demographic variables and their impact see questions 1–11 of the Questionnaire in “ESM Appendix 2” and detailed descriptive and econometric findings in “ESM Appendix 2”.

  15. 15.

    Similar results can be shown when marginal effects are computed at the means of our regressors and are available upon request.

References

  1. Albrecht J (2006) The use of consumption taxes to re-launch green tax reforms. Int Rev Law Econ 26(1):88–103

    Article  Google Scholar 

  2. Anderson CM, Putterman L (2006) Do non-strategic sanctions obey the law of demand? The demand for punishment in the voluntary contribution mechanism. Games Econ Behav 54(1):1–24

    Article  Google Scholar 

  3. Arce DG, Sandler T (2005) The dilemma of the Prisoners’ dilemma. Kyklos (Wiley Blackwell) 58(1):3–24

    Article  Google Scholar 

  4. Bagnoli M, Watts SG (2003) Selling to socially responsible consumers: competition and the private provision of public goods. J Econ Manag Strategy 12(3):419–445

    Article  Google Scholar 

  5. Becchetti L, Salustri F (2015) The vote with the wallet as a multiplayer Prisoner’s dilemma. In: AICCON working papers, p 141

  6. Becchetti L, Ciciretti R, Dalo A, Herzel S (2014) Socially responsible and conventional investment funds: performance comparison and the global financial crisis. In: Working paper series, 04\_14, The Rimini Centre for Economic Analysis

  7. Cadsby C, Maynes E (1999) Voluntary provision of threshold public goods with continuous contributions: experimental evidence. J Public Econ 71(1):53–73

    Article  Google Scholar 

  8. Carpenter JP (2007) The demand for punishment. J Econ Behav Organ 62(4):522–542

    Article  Google Scholar 

  9. Cason TN, Gangadharan L (2002) Environmental labeling and incomplete consumer information in laboratory markets. J Environ Econ Manag (Elsevier) 43(1):113–134

    Article  Google Scholar 

  10. Couture T, Gagnon Y (2010) An analysis of feed-in tariff remuneration models: implications for renewable energy investment. Energy Policy 38(2):955–965

    Article  Google Scholar 

  11. Dufwenberg M, Gächter S, Hennig-Schmidt H (2011) The framing of games and the psychology of play. Games Econ Behav 73(2):459–478

    Article  Google Scholar 

  12. Ellingsen T, Johannesson M, Mollerstrom J, Munkhammar S (2012) Social framing effects: preferences or beliefs? Games Econ Behav 76(1):117–130

    Article  Google Scholar 

  13. Falkinger J, Fehr E, Gächter S, Winter-Ebmer R (2000) A simple mechanism for the efficient provision of public goods: experimental evidence. Am Econ Rev 90(1):247–64

    Article  Google Scholar 

  14. Fehr E, Gächter S (2000) Cooperation and punishment in public goods experiments. Am Econ Rev 90:980–994

    Article  Google Scholar 

  15. Figuières C, Masclet D, Willinger M (2013) Weak moral motivation leads to the decline of voluntary contributions. J Public Econ Theory 15(5):745–772

    Article  Google Scholar 

  16. Fischbacher U (2007) z-Tree: Zurich toolbox for ready-made economic experiments. Exp Econ 10(2):171–178

    Article  Google Scholar 

  17. Fosgaard TR, Hansen LG, Wengström E (2017) Framing and misperception in public good experiments. Scand J Econ 119(2):435–456

    Article  Google Scholar 

  18. Hayes M (2006) On the efficiency of fair trade. Rev Soc Econ 64(4):447–468

    Article  Google Scholar 

  19. Iturbe-Ormaetxe IK, Ponti G, Tomás J, Rives LU (2011) Framing effects in public goods: prospect theory and experimental evidence. Games Econ Behav 72(2):439–447

    Article  Google Scholar 

  20. LeClair MS (2002) Fighting the tide: alternative trade organizations in the era of global free trade. World Dev 30(7):1099–1122

    Article  Google Scholar 

  21. Lyon TP, Maxwell JW (2002) Voluntary approaches to environmental regulation: a survey. In: Franzini M, Nicita A (eds) Economic institutions and environmental policy: past present and future. Ashgate Publishing Ltd, Aldershot, pp 75–120

    Google Scholar 

  22. Marconi D (2010) Trade, technical progress and the environment: the role of a unilateral green tax on consumption. In: Temi di discussione (economic working papers). Bank of Italy, Rome, p 744

  23. Masclet D, Noussair C, Tucker S, Villeval MC (2003) Monetary and non-monetary punishment in the voluntary contributions mechanism. Am Econ Rev 93(1):366–380

    Article  Google Scholar 

  24. Maseland R, de Vaal A (2002) How fair is fair trade? De Econ 150(3):251–72

    Google Scholar 

  25. Moore G (2004) The fair trade movement: parameters, issues and future research. J Bus Ethics 53(1–2):73–86

    Article  Google Scholar 

  26. Noussair C, Tucker S (2005) Combining monetary and social sanctions to promote cooperation. Econ Inq West Econ Assoc Int 43(3):649–660

    Google Scholar 

  27. Nikiforakis N, Normann HT (2008) A comparative statics analysis of punishment in public-good experiments. Exp Econ 11(4):358–369

    Article  Google Scholar 

  28. Redfern A, Snedker P (2002) Creating market opportunities for small enterprises: experiences of the fair trade movement. ILO, Geneva

    Google Scholar 

  29. Rode JR, Hogarth M, Le Menestrel M (2008) Ethical differentiation and market behavior: an experimental approach. J Econ Behav Organ 66:265–280

    Article  Google Scholar 

  30. Rapoport A, Eshed-Levy D (1989) Provision of step-level public goods: effects of greed and fear of being gypped. Organ Behav Hum Decis Process 44(3):325–344

    Article  Google Scholar 

  31. Säll S, Gren IM (2012) Green consumption taxes on meat in Sweden. Department of Economics publications, Swedish University of Agricultural Sciences, Uppsala

  32. van de Kragt AJC, Orbell JM, Dawes RM (1983) The minimal contributing set as a solution to public goods problems. Am Political Sci Rev 77:112–122

    Article  Google Scholar 

  33. Vasileiou E, Georgantzis N (2015) An experiment on energy saving competition with socially responsible consumers: opening the black box. J Behav Exp Econ 58:1–10

    Article  Google Scholar 

  34. Windsor D (2006) Corporate social responsibility: three key approaches. J Manag Stud 43(1):93–114

    Article  Google Scholar 

Download references

Acknowledgements

The study was funded by SmartLab (http://www.smartlabkaralis.com). We thank Andrea Attar, Marco Battaglini, Francesco Bogliacino, Mark Brockway, Giacomo Corneo, Maurizio Fiaschetti, Werner Güth, Luca Lambertini, Victor Murinde, Christine Oughton, Arsen Palestini, and François Salanie for their helpful suggestions and all the participants to the 2015 seminar held at the University of Berlin, the 2015 Luiss lab seminar in Rome, the 2016 Villa Mondragone Economic Conference, the 2016 RES-PhD Meeting in London, the 2017 DeFiMS seminar at SOAS University of London, and the 2017 IEA World Congress in Mexico City for the useful comments and suggestions received. We are also grateful to Alejandra Vasquez, Tiziana Medda, and Antonio Fadda for their invaluable research assistance provided throughout this project.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Leonardo Becchetti.

Electronic supplementary material

Below is the link to the electronic supplementary material.

355_2018_1130_MOESM1_ESM

355_2018_1130_MOESM2_ESM

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Becchetti, L., Pelligra, V. & Salustri, F. The impact of redistribution mechanisms in the vote with the wallet game: experimental results. Soc Choice Welf 51, 595–619 (2018). https://doi.org/10.1007/s00355-018-1130-8

Download citation