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Improving Voluntary Public Good Provision Through a Non-governmental, Endogenous Matching Mechanism: Experimental Evidence

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Abstract

Social norms can help to foster cooperation and to overcome the free-rider problem in the private provision of public goods. This paper focuses on the endogenous establishment of an average-oriented norm which sanctions deviations from average public good contributions. In a laboratory experiment, we analyse whether subjects are willing to implement a punishment and reward scheme at their own expense by applying the theory of non-governmental norm enforcement put forward by Buchholz et al. (J Public Econ Theory 16(6):899–916, 2014). Based on their theory, which omits a central authority but introduces an endogenously determined enforcement mechanism, we implement a two-stage public good game. In the first stage, subjects determine the strength of the sanctioning mechanism on their own. In the second stage, they decide on their personal contributions to the public good based on the established mechanism. In line with comparable pool punishment experiments, we find that subjects are apparently willing to contribute funds in order to establish a norm enforcement mechanism. Groups over-invest in the mechanism, but this over-investment decreases over time. These investments seem to be driven by the subjects’ previous individual contributions and partly by a number of strategic considerations, i.e. the previous average contribution made to the public good lowers the investment in the sanctioning mechanism. In the second stage of our experiment, higher norm enforcement parameters tend to lead to higher public good contributions. The earnings with the mechanism are on average higher than without.

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Notes

  1. See also Löschel and Rübbelke (2014), who discuss voluntary provision and undersupply of public goods in an international context.

  2. Buchholz et al. (2015) analyse Guttman’s scheme in a one-sided matching setting.

  3. For an approach with endogenously determined intensity of the social norm, see Lindbeck et al. (1999). Mengel (2008) provides another approach in which the rising number of agents internalising the social norm defines the degree of the social norm in a prisoners’ dilemma interaction model.

  4. Households initially consuming less than the average amount of energy use the descriptive norm as justification to consume more.

  5. Please note that the nominal unit prices of the private and public goods are assumed to be equal to unity.

  6. Please see Rege (2008) for a model in which social status is used to signal the non-observable abilities of subjects.

  7. For further discussion on voluntary provision of public goods with interior solutions, please see Laury and Holt (2008).

  8. In the instructions the attached table is based on Eq. (5) and provides the conversion of group investment, which the enforcement agency receives in order to determine the level of sanctioning (see Supporting Material).

  9. In settings with second-order punishment, individuals who do not contribute to the punishment regime are also punished.

  10. The high values result from some very high contributions which might indicate that subjects did not understand how the mechanism works.

  11. The upper bound of the first stage contribution is based on the theoretical proposition, put forward by Buchholz et al. (2014), that the average contribution to the enforcement mechanism is never higher than half of the endowment which in our case is 25.

  12. The individual’s contribution to the enforcement mechanism is the dependent variable. It is censored between zero and the endowment of 50 LD which calls for a censored model. Therefore, we provide a pooled Tobit analysis. We expect learning effects which are the reason for including the dependent variable—previous contributions to the mechanism—and previous public good contributions.

  13. Summary statistics of public good contribution by groups for each treatment can be provided upon request.

  14. Alternatively, one can use individual contributions as the basis for the calculation of the CIs. These intervals are similar, but a little smaller.

  15. Analyses for the baseline treatment can be provided upon request.

  16. See Goodwin (2012), Hagman et al. (2015) and Michalek et al. (2016) for the use of nudging in politics.

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Acknowledgements

Financial support by the German Federal Ministry of Education and Research (FKZ 01UN1016A) and the Deutsche Forschungsgemeinschaft (DFG, Grant No. SFB504) for the experimental laboratory University Mannheim is gratefully acknowledged. We thank Jürgen Bracht, Josef Falkinger, and Simon Gächter for the kind provision of their experimental instructions. We are also indebted to the participants of seminars and conferences held in Bilbao, Istanbul, Kiel, Mannheim, and Oxford for helpful comments. Part of the research was conducted during a research stay at the Basque Centre for Climate Change (BC3). We thank the Institute for its hospitality. We thank Carlo Gallier for his support.

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Authors and Affiliations

  1. Centre for European Economic Research (ZEW) L7,1, 68161, Mannheim, Germany

    Christiane Reif & Andreas Löschel

  2. Technische Universität Bergakademie Freiberg Schloßplatz 1, 09599, Freiberg, Germany

    Dirk Rübbelke

  3. Westfälische Wilhelms-University Münster Am Stadtgraben 9, 48143, Münster, Germany

    Andreas Löschel

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  1. Christiane Reif
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Reif, C., Rübbelke, D. & Löschel, A. Improving Voluntary Public Good Provision Through a Non-governmental, Endogenous Matching Mechanism: Experimental Evidence. Environ Resource Econ 67, 559–589 (2017). https://doi.org/10.1007/s10640-017-0126-7

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