Love for Efficiency or Confusion? A QRE Analysis of Individual Contributions in a Public Good Game
Abstract
Does the hypothesis of 'love for (group) efficiency' account for subjects' over-contribution in public good games? By using data from a VCM experiment with heterogeneous endowments and asymmetric information, we estimate a quantal response equilibrium (QRE) extension of a model in which subjects have preferences for group efficiency. Under the hypothesis of homogeneous population, the estimated parameter of subjects' concerns for efficiency vanishes and most of the variability of contributions seems to be explained by noisy behaviors. A different picture emerges when we introduce cross-subject heterogeneity in concerns for group efficiency. In this case, the majority of the subjects makes contributions that are compatible with the hypothesis of 'love for (group) efficiency'. A formal likelihood-ratio test strongly rejects the models not allowing for noise in contributions and homogeneous subjects for the more general QRE extension with heterogeneous preferences for (group) efficiency coupled with noise in subjects' behavior.Download Info
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Paper provided by ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy in its series ISLA Working Papers with number 37.Length: 17 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:slp:islawp:islawp37
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Related research
Keywords: Love for (Group) Efficiency; Voluntary Contribution Mechanism; Quantal Response Equilibrium; Laboratory Experiment.;Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-14 (All new papers)
- NEP-CBE-2010-08-14 (Cognitive & Behavioural Economics)
- NEP-EXP-2010-08-14 (Experimental Economics)
- NEP-PBE-2010-08-14 (Public Economics)
References
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