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Does decentralization of decisions increase the stability of large groups?

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Abstract

Using a laboratory experiment with nested local and global public goods, we analyze the stability of global groups when individuals have the option to separate, according to the degree of decentralization of decision-making. We show that increasing the number of decisions made at the local level within a smaller group reduces the likelihood that individuals vote in favor of a configuration that includes no global good for interacting only within their local group. Voting for such a configuration is more likely when global group members are less cooperative and local group members are more cooperative. Reinforcing local group identity has no impact on votes.

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Notes

  1. This is well illustrated by the example of the French Socialist Party, which initially granted its different factions more autonomy, trying to prevent a split in the party.

  2. In our design, voting for the configuration with three local public goods corresponds to the dissolution of the global group. In real settings, secessions take frequently the form of a region separating from the rest of the country, but there are also examples in which the country itself dissolves (e.g., Yugoslavia, USSR).

  3. To control for order effects, we invert the order of Parts 1 and 2 in half of our sessions. Half of the subjects were contributing to global public goods in the periods right before the time of the vote (Part 2), while the other half contributed to global public goods in Part 1. Depending on the experimental session, the vote thus had one of two meanings: either subjects voted directly for a dissolution or “break-up” of the global group (i.e., like a secession), or they voted against the reinstatement or “re-unification” of the global group. Both interpretations, however, relate to the stability of the global group. To keep the discussion readable, the text will refer to subjects voting “for the configuration that includes no global good,” including both secession from the global group, and opposition to its re-unification. In our analysis, we control for this order effect.

  4. A recent literature has identified a democracy premium in public good games when an institutional arrangement is the result of a vote compared to when it is imposed exogenously (e.g., Tyran and Feld 2006; Dal Bó et al. 2010; Sutter et al. 2010; Markussen et al. 2014). We can observe behavior when the only local public goods are imposed exogenously and when they result from a secession vote. However, these two situations do not occur in the same part of the experiment. Because of the decay of cooperation over time, we cannot identify cleanly the existence of a democracy premium.

  5. Although it seems largely artificial, we introduced a multiplicity of identical public goods because we want subjects to make the same total number of contribution decisions when we introduce both local and global public goods than when only local public goods are available. Moreover, previous studies (Bernasconi et al. 2009) have shown the positive “unpacking effect” on contributions of having two identical public goods instead of a single one.

  6. Our design exposed the subjects to each configuration before letting them vote for one of the two settings. One reason was to let subjects become familiar with each environment before voting and to give the same chance, ex ante, to each regime to be voted for. Another reason was to avoid introducing two changes at the same time if people voted for a regime that they never experienced before. This usually differs in real settings where citizens may vote for a regime they were never exposed to before. There are, however, examples of federations of countries (e.g., Ex-Yugoslavia, former USSR) that were initially independent and then experienced a period of unification to finally secede and become again independent.

  7. Similarly, when the game is played in the reverse order, the rule prevents a single group to impose re-unification although this situation would be less constraining since local groups who are willing to contribute only to the local public goods would not be forced to contribute to the global public goods.

  8. This could be compared to tastes for own-ethnic group neighborhoods (e.g., Wong 2013). In contrast, reinforcing global group identity could have had the opposite effect. For example, Rand et al. (2009) showed that before primary elections in the Democratic Party in the US, the supporters of each candidate had a strong bias against the supporters of the other camp; this local group bias disappeared once the primary elections determined which candidate would run for the general elections.

  9. Unless specified otherwise, all non-parametric tests are two-tailed throughout the paper, and an independent observation corresponds to the contributions of each global group averaged over each part of 12 periods.

  10. Conversely, subjects who first experience a mixed configuration of public goods and then the three local goods alone are more likely to choose to keep the global group intact and, in a way, “re-unify” the global group. In other words, subjects seem to have a preference for the initial option. One possibility is that they remember those periods having larger average contributions. Since we do control for contributions, another possibility is that subjects see the first option presented as a default option.

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Acknowledgements

This research was supported by a grant from the University of Fribourg and was performed within the framework of the LABEX CORTEX (ANR-11-LABX-0042) of Université de Lyon, within the program Investissements d’Avenir (ANR-11-IDEX-007) operated by the French National Research Agency (ANR). The authors wish to thank the editor and two anonymous referees for helpful comments and suggestions. The authors are also grateful to Q. Thévenet for programming the experiment, and to P. de Donder, D. Masclet, S. Paty, E. Spolaore and M. Willinger for helpful comments on a previous version. We also benefited from discussions with researchers at the IQSS (Harvard University), and from presentations at seminars at the Universities of Fribourg and Lyon, and at the following conferences: EEA (Lisbon), AFSE (Nice), Journées de Microéconomie Appliquée (Besançon), and PEARL (Santiago de Compostella).

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Correspondence to Simon Lapointe.

Appendices

Appendix 1

See Figs. 2 and 3.

Fig. 2
figure 2

Timeline of the C-MinI treatment. LPG for local public goods and GPG for global public goods

Fig. 3
figure 3

Timeline of the D-MinI treatment. LPG for local public goods and GPG for global public goods

Appendix 2

See Table 4.

Table 4 Characteristics of the experimental sessions

Appendix 3. Instructions (translated from French)

The following instructions are for the C-MinI treatment. We add the instructions that are specific to the D-MinI treatment and C-MinI treatment in italics into brackets. The instructions for the sessions where we control for the order effect are identical to these instructions we only invert part 1 and part 2.

3.1 General information

We thank you for participating in this experiment in economics. Your payoffs depend on your decisions. It is therefore important that you read the following instructions carefully.

Instructions are distributed for your personal use. We thank you for not communicating with other participants during the experiment.

During the experiment, we will not talk about Euros but about ECU (Experimental Currency Units). All payoffs will be calculated in ECU. At the end of the experiment, the total number of ECU that you earned will be converted into Euros at the following conversion rate:

$$ 100{\text{ ECU}} = 0. 4 5 {\text{ Euro}} $$

In addition to this amount, you will receive a show up fee of 5 Euros. All payments will be made in private and in cash in a separate room. Other participants will never know the amount of your payoffs in this experiment.

3.2 Group formation

Before the start of the first part, the computer program will form randomly groups composed of 9 people. Each group of 9 people is composed of three sub-groups of 3 people.

A group of 9 people is called “global group” and a sub-group of 3 people a “local group”. A global group thus comprises three local groups, A, B and C.

[Additional instructions for the C-I and D-I treatments:

Each local group of 3 people within a global group is formed according to the proximity of the answers given in a questionnaire that will appear on your screen. The questionnaire consists of four proposals. For each of them, we ask you to tell if you:

  • Strongly disagree

  • Disagree

  • Agree

  • Strongly agree

Once the questionnaire is completed by each participant the computer program will use an algorithm to form the local groups according to the proximity of the answers given to these different proposals.

Thus, you will be paired in your local group with two other people in the overall group of 9 that expressed the nearest opinions to yours. You will not know at any time the detailed answers of the other participants; likewise, no one will know the details of your answers.

The two other local groups are composed of participants whose views are less similar to yours but the name of the local group (A, B, C) is independent of the distance with the opinions of your local group (for example, if you are in Group A, the members of group C are not necessarily further from your opinions than the members of group B).

To sum up, each group of 9 people is composed of three sub-groups of 3 people. Groups of 9 people are randomly formed while the sub-groups of 3 are formed using the algorithm].

Thus, you will be at the same time a member of a local group with 2 other people and a member of a global group that includes your local group and the 6 members of the two other local groups.

The following table illustrates the composition of a global group and its local groups.

figure a

For example, one participant is a member of both the global group and the local group A.

The composition of each group will remain the same throughout the experiment. You will remain paired with the same co-participants in your local group and in your global group in all parts of the experiment. You will never know the identity of your co-participants and your co-participants will never know your identity. All decisions are anonymous.

3.3 Part 1

The first part consists of 12 periods during which you may allocate ECU between multiple accounts. Your payoff in this section is the sum of your earnings in each period.

3.3.1 Description of each period

At the beginning of each period, each participant receives 60 ECU. We call this sum the “endowment”. You have to decide how to allocate this endowment between your private account and several public accounts.

You have the choice to allocate the ECU in three public accounts: two global public accounts and one local public account. [This sentence is replaced by the following in the D-I and D-MinI treatments: You have the choice to allocate the ECU in three public accounts: one global public account and two local public accounts].

  • The 9 members of the global group may allocate ECU to the global public account G1 and to the global public account G2. The amount of a global public account is the sum of the ECU allocated by you and the other 8 members of the global group to this account.

  • Only the 3 members of your local group may allocate ECU to your local public account. The amount of your local public account is the sum of the ECU allocated by you and the two other members of your local group to this account.

Members of the two other local groups to which you do not belong also have their own local public account. The local group A can allocate ECU to the local public account A, the local group B may allocate ECU to the local public account B, and the local group C may allocate ECU to the local public account C.

Thus, you have to decide how much of your 60 ECU you keep on your private account and how many ECU you allocate to:

  • The global public account G1 (between 0 and 60 ECU)

  • The global public account G2 (between 0 and 60 ECU) [In the D-I and D-MinI treatments this is replaced by: Your local public account (A, B or C) (between 0 and 60 ECU).]

  • Your local public account (A, B or C) (between 0 and 60 ECU).

You must enter a value in each box on your screen. The difference between your endowment (60 ECU) and the sum of ECU allocated to each public account remains in your private account. The sum of your ECU allocated to these accounts, public and private, cannot exceed 60 ECU.

You will make your decisions as in the screen shown in Fig. 4. The consequences of your decisions are explained in details on the next page.

Fig. 4
figure 4

Example of a decision screen. Accounts appeared on the computer screen in a random order

Once all group members have decided the amount they allocate to the three public accounts, you are informed of:

  • The total amount allocated to each global public account by the 9 members of the global group (including your allocation) [In the D-I and D-MinI treatments this is replaced by: The total amount allocated to the global public account by the 9 members of the global group (including your allocation).]

  • The total amount allocated to each global public account by the 3 members of your local group (including your allocation) [In the D-I and D-MinI treatments this is replaced by: The total amount allocated to the global public account by the 3 members of your local group.]

  • The total amount allocated to your local public account by the 3 members of your local group (including your allocation). [In the D-I and D-MinI treatments this is replaced by: The total amount allocated to your local public accounts by the 3 members of your local group (including your allocation).]

Your screen will also remind you the amount of your allocation to the global public accounts and the local public account and the amount held on your private account. [This sentence is replaced by the following in the D-I and D-MinI treatments: Your screen will also remind you the amount of your allocation to the global public account and to the local public accounts and the amount held on your private account.] It also shows your payoff in that period. You are not informed of the amounts allocated to local public accounts by the two other local groups.

Figure 5 reproduces the feedback screen at the end of a period.

Fig. 5
figure 5

Example of the feedback screen displayed at the end of a period

3.4 Calculation of your payoff

The payoff from a public account is different depending on whether it is a global public account or a local public account:

  • The payoff from each global public account represents 20% of the sum of the 9 individual allocations to this global public account, [This sentence is replaced by the following in the D-I and D-MinI treatments: The payoff from the global public account represents 20% of the sum of the 9 individual allocations to the global public account.]

  • The payoff from the local public account represents 50% of the sum of the three individual allocations to the local public account. [This sentence is replaced by the following in the D-I and D-MinI treatments: The payoff from each local public account represents 50% of the sum of the three individual allocations to this local public account.]

Your payoff at each period is calculated using the following formula (if you have difficulty understanding these formulas do not hesitate to ask questions):

figure b

This formula shows that your payoff at the end of a period consists of two parts:

  1. (1)

    the ECU that you have kept for yourself (namely your endowment—your allocation to the public accounts)

  2. (2)

    the sum of the total payoffs from both global public accounts and your local public account. [This sentence is replaced by the following in the D-I and D-MinI treatments: of the sum of the total payoff from the global public account and your two local public accounts.]

Here are some examples.

3.5 Example 1

Suppose that the sum of the allocations of the 3 members of a local group to their local public account is 90 ECU. Suppose also that the sum of the allocations of the 9 members of the global group is 70 ECU to the global public account 1 and 300 ECU to the global public account 2. In this case, the payoff from the public accounts is: 50% (90) + 20% (70) + 20% (300) = 45 + 14 + 60 = 119 ECU

[This example is replaced by the following in the D-I and D-MinI treatments: Suppose that the sum of the allocations of the 3 members of a local group is 90 ECU to their local public account 1 and 70 ECU to their local public account 2. Suppose also that the sum of the allocations of the 9 members of the global group is 300 ECU to the global public account. In this case, the payoff from the public accounts is: 50% (90) + 50% (70) + 20% (300) = 45 + 35 + 60 = 140 ECU]

3.6 Example 2

Suppose that the sum of the allocations of the 3 members of a local group to their local public account is 60 ECU. Suppose also that the sum of the allocations of the 9 members of the global group is 90 ECU to the global public account 1 and 50 ECU to the global public account 2. In this case, the payoff from the public accounts is: 50% (60) + 20% (90) + 20% (50) = 30 + 18 + 10 = 58 ECU.

[This example is replaced by the following in the D-I and D-MinI treatments: Suppose that the sum of the allocations of the 3 members of a local group is 60 ECU to their local public account 1 and 90 ECU to their local public account 2. Suppose also that the sum of the allocations of the 9 members of the global group is 50 ECU to the global public account. In this case, the payoff from the public accounts is: 50% (60) + 50% (90) + 20% (50) = 30 + 45 + 10 = 85 ECU.]

You always have the option to keep the ECU on your private account or to allocate them to a public account. Each ECU you keep on your private account increases your payoff in the current period by 1 ECU.

If you allocate 1 ECU to a public account, the total allocation to this public account increases by 1 ECU. In this case, your payoff increases by 50% × 1 = 0.5 ECU if it is a local public account and by 20% × 1 = 0.2 ECU if it is a global public account. Your allocation to a public account also increases the payoff of other members:

  • If it is a local public account, the payoff of the two other members of your local group will also increase by 0.5 ECU each. So, the total payoff of your local group from your local public account will be increased by 3 × 0.5 = 1.5 ECU.

  • If it is a global public account, the payoff of the eight other members of the global group will also be increase by 0.2 ECU each. So, the total payoff of the global group from the global public account is increased by 9 × 0.2 = 1.8 ECU.

Similarly, your payoff increases for each ECU allocated to a global public account by the other members of the group and for each ECU allocated to your local public account by the other members of your local group. For each ECU allocated by another member of your local group or global group, you earn 0.5 and 0.2 ECU respectively.

However, your payoff is not affected by the ECU allocated by members of other local groups to their local public account.


To sum up:

  • You receive an endowment.

  • You decide on your allocation to two global public accounts and one local public account. [This sentence is replaced by the following in the D-I and D-MinI treatments: You decide of your allocation to one global public account and two local public accounts.]

  • You are informed on the amount of allocation to each global public account and local public account associated with your local group and your payoff. [This sentence is replaced by the following in the D-I and D-MinI treatments: You are informed on the amount allocated to the global public account and to each local public account by your local group members, and on your payoff.]

At the end of each period, a new period starts automatically. You receive a new endowment 60 ECU.

* * *

Please read again these instructions. If you have any question, raise your hand and we will answer to your questions in private. Thank you to fill out the understanding questionnaire that has been distributed. We will come to you to check your answers in private.

3.7 Part 2

(distributed after completion of Part 1 and the questionnaire)

The second part consists of 12 periods. Your payoff in this section is the sum of your earnings in each period. The composition of your local group and your global group is the same as in the previous part, but in this part you will only interact with the other two members of your local group.

3.7.1 Description of each period

The second part is similar to the first part: at the beginning of each period, each participant receives 60 ECU and has to decide how to allocate this endowment between his private account and three public accounts.

The only difference with the previous part is that the three public accounts are now three local public accounts.

Only three members of your local group may allocate ECU to your local public accounts. The amount of the local public accounts is the sum of the ECU allocated by you and the two other members of your local group to these accounts.

Members of the two other local groups to which you do not belong also have their own local public accounts. The local group A may allocate ECU to the local public accounts A1, A2 and A3; the local group B may allocate ECU to the local public accounts B1, B2 and B3; and the local group C may allocate ECU to the local public accounts C1, C2 and C3.

Thus, you need to decide how much of your 60 ECU you keep on your private account and how much you allocate to:

  • Your local public account 1 (A, B or C) (between 0 and 60 ECU)

  • Your local public account 2 (A, B or C) (between 0 and 60 ECU)

  • Your local public account 3 (A, B or C) (between 0 and 60 ECU)

You must enter a value in each box displayed on your screen. The difference between your endowment (60 ECU) and the sum of the ECU allocated to each public account remains on your private account. The sum of all your ECU allocated to these accounts, public and private, cannot exceed 60 ECU.

Once all group members have decided the amount they allocate to these three public accounts, you are informed on the total amount allocated to each of the three local public accounts by the 3 members of your local group (including your allocation).

Your screen will also remind you the amount of your allocation to each local public account and the amount held on your private account. It also shows your payoff in that period. You are not informed of the amounts allocated to local public accounts by the two other local groups.

3.8 Calculation of your payoff

The payoff drawn from each local public account represents 50% of the sum of the 3 individual allocations to this local public account.

Your payoff at each period is calculated using the following formula:

figure c

This formula shows that your payoff at the end of a period consists of two parts:

  1. (1)

    the ECU that you have kept for yourself (namely your endowment—your allocation to the public accounts)

  2. (2)

    the sum of the total payoffs from your local public accounts.

As previously, each ECU you keep in your private account increases your payoff in the current period by 1 ECU. If you allocate 1 ECU to a local public account, the total allocation of this public account increases by 1 ECU. In this case, your payoff increases by 50% × 1 = 0.5 ECU. The payoff of two other members of your local group will also be increased by 0.5 ECU each. Thus, the total payoff of the local group from the local public account will be increased by 3 × 0.5 = 1.5 ECU.

Similarly, your payoff increases by 0.5 ECU for each ECU allocated to a local public account by the other members of your local group. However, your income is not affected by the ECU allocated by the members of other local groups to their local public accounts.

At the end of each period, a new period starts automatically. You will receive a new endowment of 60 ECU.

* * *

Please read again these instructions. If you have any question, raise your hand and we will answer to your questions in private.

3.9 Part 3

(distributed after completion of Part 2)

The third part consists of 12 periods. Your payoff in this section is the sum of your payoffs in each period. The composition of your local group and your global group is the same as in the previous parts.

3.10 Choice of the available public accounts

Before the start of the first period, you have to vote to select the nature of the public accounts that will be available for the next 12 periods. You will vote only once in this part.

You can choose between two options:

  • An option with one local public account and two global public accounts (as in part 1) [This sentence is replaced by the following in the D-I and D-MinI treatments: An option with two local public accounts and one global public account (as in part 1).]

  • An option with three local public accounts (as in Part 2).

If the option with one local public account and two global public accounts is selected [This sentence is replaced by the following in the D-I and D-MinI treatments: If the option with two local public accounts and one global public account is selected], you will interact at the same time with the 2 other members of your local group and with the members of the other two local groups (i.e., with 8 other people).

If the option with three local public accounts is selected, you will only interact with the two other members of your local group.

Once all the members have voted, the computer program calculates the majority choice in each of the three local groups. The option that will be applied to the next 12 periods of the game is the one that was chosen by the majority of the three local groups within your global group of 9 people.

Before the start of the first period, you are informed on the outcome of the vote in your local group and on the majority choice in the global group. You are not informed about the details of the votes in your local group nor in other groups.

3.10.1 Description of each period

You receive an initial endowment of 60 ECU at the beginning of the period. Depending on the majority vote, you can allocate the ECU of your endowment either between your private account, a local public account and two global public accounts (according to the rules of Part 1) [This sentence is replaced by the following in the D-I and D-MinI treatments: you can allocate the ECU of your endowment either between your private account, two local public accounts and one global public account (according to the rules of Part 1)] or between your private account and three local public accounts (according to the rules of Part 2).

* * *

Please read again these instructions. If you have any question, raise your hand and we will answer to your questions in private.

Appendix 4. Questionnaire used for the formation of groups

Please read each statement very carefully and evaluate how much you agree or disagree with each one of them. For each statement, give your answer by checking the box that best describes your opinion.

You can only choose one answer from the following options:

1. Strongly disagree

2. Disagree

3. Agree

4. Strongly agree

Statement 1: I enjoy visiting museums of contemporary art.

Statement 2: Surrogate motherhood should be authorized.

Statement 3: I am willing to consume genetically modified food.

Statement 4: I love practicing sports.

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Bjedov, T., Lapointe, S., Madiès, T. et al. Does decentralization of decisions increase the stability of large groups?. Soc Choice Welf 51, 681–716 (2018). https://doi.org/10.1007/s00355-018-1133-5

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