Abstract
We compare standard (laboratory) and non-standard (field) subject pool behavior in an extensive form public goods game with random punishment. Our experimental investigation is motivated by real-world ‘Activists’ encouraging public goods provision by firms; an activity known as corporate social responsibility. We find that relative to laboratory subjects, activists in Mumbai are more willing to settle at the Nash equilibrium of the game (which entails increased provision of public goods) and are more willing to punish non-cooperative firm behavior even if such punishments hurt their own payoffs.
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Notes
Bayraktar (2019) demonstrates that threshold and/or a volatility effects might explain the low effectiveness of public investment in sub-Saharan Africa: Public investment might only spur economic growth if it is provided in sufficient volume and at stable levels over time. By inducing firms to increase public investment, Activists could increase the overall effectiveness of investment to a level sufficient to spur growth.
Kitzmueller and Shimshack (2012) define CSR as any voluntary social activity that causes observable behavior or output by firms exceeding levels set by legal regulation.
Section 135 of India's Companies Act of 2013 requires firms that exceed specific size/profit thresholds to spend a minimum of 2% of their net profit on CSR (or explain why they are unable to do so). Thus, firms are required to contribute to public goods provision; NGO activists might attempt to increase the firms’ provisioning beyond the mandatory amount.
This organization is a social movement/youth empowerment oriented network; detailed information is available at https://brmworld.org/.
Benabou and Tirole (2010) identify three CSR channels: a long-term perspective on profitability adopted by firms who engage in CSR versus those who do not; that firms engage in CSR due to shareholder concerns; and that firms engage in CSR due to the concerns of corporate insiders and managers.
Zheng (2019) explains non-organized boycott activities and their effects on CSR provision in a war of attrition framework, providing additional motivation for our analyses.
Hayakawa (2017) describes a dynamic game analyzing entry/exit in common pool resource problems.
Because endogenous probabilities determine equilibrium in Baron (2001), it is not possible to design an experiment that exactly replicates his model. Additionally, given our focus on standard vs. non-standard subject pool behavior, we chose instead to experimentally test a main tension of CSR behavior.
Both the established laboratory and field subject pools respond as predicted to variation in the MPCR of the VCM game.
A differentiation of activists’ operations exists, but scholars emphasize that activists’ operations may not constitute institutional change (den Hond and de Bakker 2007). We do not expect fundamental changes in the structure of our experiment to result from activists. Instead, we find consequences of the actions of players assigned the Activist role to determine payoffs for all players.
In a VCM, (\(i\)) individuals must decide how to allocate their endowments of points (\(E_{i}\)) between a hypothetical public good and a private good (\(C_{i}\)). The payoff for individual \(i\) is given by \(E_{i} - C_{i} + {\text{MPCR} }\times {\text{Total contributions}}\).
See also Normann and Rau (2015).
All standard subject pool sessions were conducted at the Social Science Experimental Laboratory (SSEL) at New York University Abu Dhabi (NYUAD).
Subjects do not know that the tasks have been designed to have no variation in endowments; in this part of our design, we are merely looking for subjects to have perfect real effort task scores.
See the Appendix for screenshots of the experimental software.
Subjects had to successfully answer quiz questions about the VCM and stage game prior to commencing the games to ensure they understood how the games functioned.
The CSR analog behind this is that once the Firm rejects the Activist’s demand, the Activist attempts a boycott against the Firm’s products.
Some “computer labs” were no more than converted corrugated tin roof shacks that provided internet and computing access for local communities. Photographs of lab-in-the-field sites available in the Appendix.
Some ‘Activist’ subjects asked why they were asked survey questions at the end of the experiment; the non-responses are likely caused by privacy concerns, despite our assurances that the responses would be treated confidentially.
The code for the laboratory and field experiments and replication data are available upon request.
We chose to create the VCMRATE variable since there was slightly more variation in RET scores amongst field subjects. Thus, the VCMRATE variable “deflates” contributions by earned endowments.
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Dave, C., Hamre, S., Kephart, C. et al. Subjects in the lab, activists in the field: public goods and punishment. Eurasian Econ Rev 10, 533–553 (2020). https://doi.org/10.1007/s40822-020-00144-3
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DOI: https://doi.org/10.1007/s40822-020-00144-3