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Is regulation by milestones efficiency enhancing? An experimental study of environmental protection

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  • Freytag, Andreas
  • Güth, Werner
  • Koppel, Hannes
  • Wangler, Leo

Abstract

We analyze the effect of “milestones” on reaching a long-term target, which if missed implies dramatic payoff risks. In our experiment, a cumulative threshold public goods game, milestones are captured by intermediate contribution targets on the way to the final target. Missing the final target leads to a probabilistic total loss for all players, and missing intermediate targets may lead to the same consequences even earlier. The additional intermediate targets feature environmental protection as a process rather than a contest for reaching a final target. The regulating agency is Nature, although political agencies might implement a similar regulation. We test milestone effects by varying the size of milestones in addition to changing the marginal productivity of individual contributions and the payoff risk. Although we observe some milestone effects, additional regulation by milestones on its own does not guarantee that targets are reached.

Suggested Citation

  • Freytag, Andreas & Güth, Werner & Koppel, Hannes & Wangler, Leo, 2014. "Is regulation by milestones efficiency enhancing? An experimental study of environmental protection," European Journal of Political Economy, Elsevier, vol. 33(C), pages 71-84.
    • Handle: RePEc:eee:poleco:v:33:y:2014:i:c:p:71-84
    DOI: 10.1016/j.ejpoleco.2013.11.005
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    Cited by:

    1. Doruk İriş & Jungmin Lee & Alessandro Tavoni, 2015. "Delegation and public pressure in a threshold public goods game: theory and experimental evidence," GRI Working Papers 186, Grantham Research Institute on Climate Change and the Environment.
    2. Doruk İriş & Jungmin Lee & Alessandro Tavoni, 2015. "Delegation and public pressure in a threshold public goods game: theory and experimental evidence," GRI Working Papers 186, Grantham Research Institute on Climate Change and the Environment.
    3. Urs Fischbacher & Werner Güth & M. Vittoria Levati, 2011. "Crossing the Point of No Return: A Public Goods Experiment," Jena Economics Research Papers 2011-059, Friedrich-Schiller-University Jena.
    4. Ilona Reindl, 2022. "Wealth and Vulnerability to Climate Change: An Experimental Study on Burden Sharing among Heterogeneous Agents," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(4), pages 791-823, August.
    5. Sarah Al Doyaili & Leo Wangler, 2013. "International climate policy: does it matter? An empirical assessment," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 2(3), pages 288-302, November.
    6. Robert Böhm & Özgür Gürerk & Thomas Lauer, 2020. "Nudging Climate Change Mitigation: A Laboratory Experiment with Inter-Generational Public Goods," Games, MDPI, vol. 11(4), pages 1-20, October.
    7. Nerhagen, Lena & Brandt, Daniel & Mortazavi, Reza, 2023. "Use of public transport as a means to reach national climate objectives - On the importance of accounting for spatial differences and costs," Transport Policy, Elsevier, vol. 131(C), pages 56-65.
    8. Nisvan Erkal & Boon Han Koh & Nguyen Lam, 2023. "Using Milestones as a Source of Feedback in Teamwork: Insights from a Dynamic Voluntary Contribution Mechanism," Discussion Papers 2310, University of Exeter, Department of Economics.

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    More about this item

    Keywords

    Cumulative public goods game; Collective-risk social dilemma; Milestones; Climate change; Experiment;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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