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Voluntary Contributions to Reduce Expected Public Losses

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  • Claudia Keser

    ()

  • Claude Montmarquette

    ()

Abstract

In this experimental study we examine behavior relating to voluntary contributions to reduce expected losses associated, for example, with the occurrence of natural disasters or major industrial accidents. We ask subjects to allocate tokens between a private investment and a public investment. The latter investment reduces, for all anonymous members of the group, the probability of a loss. Expected loss without public investment is constant across treatments in which the probability of loss and initial wealth vary. In some of these treatments, the participants play under incomplete information (ambiguity). Non-parametric statistical analyses and parametric regressions yield results that are reasonably consistent with classical studies on voluntary contributions to public goods. The Nash equilibrium, under the assumption of risk neutrality, cannot be construed as representative of typical behavior. The occurrence of a loss increases the probability of playing the Nash strategy at the individual level and decreases the voluntary contributions of the group (the gambler's fallacy), making the prospect of mobilizing the population after a natural disaster more difficult. Dans cette étude expérimentale, nous examinons les déterminants des contributions volontaires visant à réduire les pertes attendues associées à des désastres naturels ou des accidents industriels majeurs. Les sujets doivent allouer leurs jetons entre un investissement privé et un investissement public. Ce dernier investissement réduit, pour tous les membres de l'équipe, la probabilité d'une perte. La perte attendue sans investissement public est constante pour tous les traitements, mais la probabilité d'une perte et la dotation initiale des sujets varie selon les traitements. Dans certains cas, les sujets jouent en situation d'information incomplète (ambiguïté). Les analyses non-paramétriques et paramétriques des données donnent des résultats cohérents avec les études classiques sur les contributions volontaires dans les biens publics. En retenant l'hypothèse que les sujets sont neutres au risque, nous observons un comportement qui rejette, pour tous les traitements, la prédiction de l'équilibre de Nash de zéro contribution dans l'investissement public. L'occurrence d'une perte accroît dans la période suivante la probabilité de jouer Nash et réduit le niveau de contribution dans l'investissement public (gambler's fallacy). Cette situation rend plus difficile la mobilisation des personnes après un désastre naturel.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2002s-60.

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Date of creation: 01 Jun 2002
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Handle: RePEc:cir:cirwor:2002s-60

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Keywords: Voluntary contributions; public losses; risk; ambiguity; experimental data; Contributions volontaires; pertes publiques; risque; ambiguïté; données expérimentales;

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Cited by:
  1. Colombier, Nathalie & Masclet, David & Mirza, Daniel & Montmarquette, Claude, 2010. "Global Security Policies Against Terrorism and the Free Riding Problem: An Experimental Approach," CEPREMAP Working Papers (Docweb) 1012, CEPREMAP.

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