IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/20015.html
   My bibliography  Save this paper

The ratchet effect in social dilemmas

Author

Listed:
  • Gallier, Carlo
  • Sturm, Bodo

Abstract

In this paper, we investigate whether dynamic incentive schemes lead to a ratchet effect in a social dilemma. We test whether subjects strategically restrict their contribution levels at the beginning of a cumulative public goods game in order to avoid high obligations in the future and how this affects efficiency. The incentive schemes prescribe that individual contributions have to be at least as high as, or strictly higher than, contributions in the previous period. We observe a substantial and statistically significant ratchet effect. Participants reduce their public good contribution levels at the beginning of the game, anticipating that higher contributions imply higher minimum contribution levels in the future, which increases the risk of being exploited by freeriders. While the dynamic incentive schemes lead to increasing contribution levels over the course of the game, this increase is not strong enough to compensate the efficiency losses at the beginning.

Suggested Citation

  • Gallier, Carlo & Sturm, Bodo, 2020. "The ratchet effect in social dilemmas," ZEW Discussion Papers 20-015, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:20015
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/215674/1/dp20015.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Leslie M. Marx & Steven A. Matthews, 2000. "Dynamic Voluntary Contribution to a Public Project," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 327-358.
    2. Duffy, John & Ochs, Jack & Vesterlund, Lise, 2007. "Giving little by little: Dynamic voluntary contribution games," Journal of Public Economics, Elsevier, vol. 91(9), pages 1708-1730, September.
    3. Cubitt, Robin & Gächter, Simon & Quercia, Simone, 2017. "Conditional cooperation and betrayal aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 110-121.
    4. Astrid Dannenberg & Andreas Lange & Bodo Sturm, 2014. "Participation and Commitment in Voluntary Coalitions to Provide Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 257-275, April.
    5. Gary Charness & Peter Kuhn & Marie Claire Villeval, 2011. "Competition and the Ratchet Effect," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 513-547.
    6. Andreoni, James, 1993. "An Experimental Test of the Public-Goods Crowding-Out Hypothesis," American Economic Review, American Economic Association, vol. 83(5), pages 1317-1327, December.
    7. Maoliang Ye & Jie Zheng & Plamen Nikolov & Sam Asher, 2020. "One Step at a Time: Does Gradualism Build Coordination?," Management Science, INFORMS, vol. 66(1), pages 113-129, January.
    8. Dorsey, Robert E, 1992. "The Voluntary Contributions Mechanism with Real Time Revisions," Public Choice, Springer, vol. 73(3), pages 261-282, April.
    9. Oprea, Ryan & Charness, Gary & Friedman, Daniel, 2014. "Continuous time and communication in a public-goods experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 212-223.
    10. Jason Aimone & Sheryl Ball & Brooks King-Casas, 2015. "The Betrayal Aversion Elicitation Task: An Individual Level Betrayal Aversion Measure," PLOS ONE, Public Library of Science, vol. 10(9), pages 1-12, September.
    11. Kesternich, Martin & Lange, Andreas & Sturm, Bodo, 2014. "The impact of burden sharing rules on the voluntary provision of public goods," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 107-123.
    12. Iris Bohnet & Fiona Greig & Benedikt Herrmann & Richard Zeckhauser, 2008. "Betrayal Aversion: Evidence from Brazil, China, Oman, Switzerland, Turkey, and the United States," American Economic Review, American Economic Association, vol. 98(1), pages 294-310, March.
    13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    14. Gerlinde Fellner & Magdalena Margreiter & Nuria Oses Eraso, 2003. "When the past is present – The ratchet effect in the local commons," Papers on Strategic Interaction 2003-23, Max Planck Institute of Economics, Strategic Interaction Group.
    15. Johannes Diederich & Timo Goeschl, 2014. "Willingness to Pay for Voluntary Climate Action and Its Determinants: Field-Experimental Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(3), pages 405-429, March.
    16. repec:ebl:ecbull:v:3:y:2008:i:23:p:1-11 is not listed on IDEAS
    17. Jessica F. Green & Thomas Sterner & Gernot Wagner, 2014. "A balance of bottom-up and top-down in linking climate policies," Nature Climate Change, Nature, vol. 4(12), pages 1064-1067, December.
    18. Hugh Macartney, 2016. "The Dynamic Effects of Educational Accountability," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 1-28.
    19. Dawes, Robyn M. & Orbell, John M. & Simmons, Randy T. & Van De Kragt, Alphons J. C., 1986. "Organizing Groups for Collective Action," American Political Science Review, Cambridge University Press, vol. 80(4), pages 1171-1185, December.
    20. Martin Kesternich & Andreas Lange & Bodo Sturm, 2018. "On the performance of rule-based contribution schemes under endowment heterogeneity," Experimental Economics, Springer;Economic Science Association, vol. 21(1), pages 180-204, March.
    21. Chaudhuri, Ananish, 1998. "The ratchet principle in a principal agent game with unknown costs: an experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 291-304, November.
    22. Jennifer Zelmer, 2003. "Linear Public Goods Experiments: A Meta-Analysis," Experimental Economics, Springer;Economic Science Association, vol. 6(3), pages 299-310, November.
    23. Werner Güth & Maria Vittoria Levati & Andreas Stiehler, "undated". "Privately Contributing to Public Goods over Time - An Experimental Study -," Papers on Strategic Interaction 2002-01, Max Planck Institute of Economics, Strategic Interaction Group.
    24. Gronberg, Timothy J. & Luccasen, R. Andrew & Turocy, Theodore L. & Van Huyck, John B., 2012. "Are tax-financed contributions to a public good completely crowded-out? Experimental evidence," Journal of Public Economics, Elsevier, vol. 96(7-8), pages 596-603.
    25. Pavel Diev & Walid Hichri, 2008. "Dynamic voluntary contributions to a discrete public good: Experimental evidence," Economics Bulletin, AccessEcon, vol. 3(23), pages 1-11.
    26. Keser, Claudia, 1996. "Voluntary contributions to a public good when partial contribution is a dominant strategy," Economics Letters, Elsevier, vol. 50(3), pages 359-366, March.
    27. Bohnet, Iris & Zeckhauser, Richard, 2004. "Trust, risk and betrayal," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 467-484, December.
    28. Eckel, Catherine C. & Grossman, Philip J. & Johnston, Rachel M., 2005. "An experimental test of the crowding out hypothesis," Journal of Public Economics, Elsevier, vol. 89(8), pages 1543-1560, August.
    29. Oran R. Young, 2016. "The Paris Agreement: Destined to Succeed or Doomed to Fail?," Politics and Governance, Cogitatio Press, vol. 4(3), pages 124-132.
    30. Ananish Chaudhuri, 2011. "Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 47-83, March.
    31. Daniel Friedman & Ryan Oprea, 2012. "A Continuous Dilemma," American Economic Review, American Economic Association, vol. 102(1), pages 337-363, February.
    32. Cardella, Eric & Depew, Briggs, 2018. "Output restriction and the ratchet effect: Evidence from a real-effort work task," Games and Economic Behavior, Elsevier, vol. 107(C), pages 182-202.
    33. Eloi Laurent, 2017. "Why Paris Did Not Solve the Climate Dilemma," SciencePo Working papers Main hal-03409169, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Blanco, Esther & Struwe, Natalie & Walker, James M., 2021. "Experimental evidence on sharing rules and additionality in transfer payments," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1221-1247.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gallier, Carlo & Sturm, Bodo, 2021. "The ratchet effect in social dilemmas," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 251-268.
    2. Peter Martinsson & Emil Persson, 2019. "Public Goods and Minimum Provision Levels: Does the Institutional Formation Affect Cooperation?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(4), pages 1473-1499, October.
    3. Schüssler, Katharina & Schüssler, Michael & Mühlbauer, Daniel, 2018. "Individual Differences and Contribution Sequences in Threshold Public Goods," Rationality and Competition Discussion Paper Series 88, CRC TRR 190 Rationality and Competition.
    4. Blanco, Esther & Struwe, Natalie & Walker, James M., 2021. "Experimental evidence on sharing rules and additionality in transfer payments," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1221-1247.
    5. Andreas Löschel & Dirk Rübbelke, 2014. "On the Voluntary Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 195-204, April.
    6. Bouma, J.A. & Nguyen, Binh & van der Heijden, Eline & Dijk, J.J., 2018. "Analysing Group Contract Design Using a Lab and a Lab-in-the-Field Threshold Public Good Experiment," Discussion Paper 2018-049, Tilburg University, Center for Economic Research.
    7. Yoshio Iida, 2021. "Communication, choice continuity, and player number in a continuous-time public goods experiment," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(4), pages 955-988, October.
    8. Marco Battaglini & Salvatore Nunnari & Thomas R. Palfrey, 2016. "The Dynamic Free Rider Problem: A Laboratory Study," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 268-308, November.
    9. Maoliang Ye & Jie Zheng & Plamen Nikolov & Sam Asher, 2020. "One Step at a Time: Does Gradualism Build Coordination?," Management Science, INFORMS, vol. 66(1), pages 113-129, January.
    10. Cubitt, Robin & Gächter, Simon & Quercia, Simone, 2017. "Conditional cooperation and betrayal aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 110-121.
    11. 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.
    12. Jürgen Huber & Laura Hueber & Daniel Kleinlercher & Thomas Stöckl, 2022. "Acceptance or rejection of welfare migration—an experimental investigation," SN Business & Economics, Springer, vol. 2(11), pages 1-28, November.
    13. Kasper Otten & Ulrich J. Frey & Vincent Buskens & Wojtek Przepiorka & Naomi Ellemers, 2022. "Human cooperation in changing groups in a large-scale public goods game," Nature Communications, Nature, vol. 13(1), pages 1-11, December.
    14. Cardella, Eric & Depew, Briggs, 2018. "Output restriction and the ratchet effect: Evidence from a real-effort work task," Games and Economic Behavior, Elsevier, vol. 107(C), pages 182-202.
    15. Haruvy, Ernan & Li, Sherry Xin & McCabe, Kevin & Twieg, Peter, 2017. "Communication and visibility in public goods provision," Games and Economic Behavior, Elsevier, vol. 105(C), pages 276-296.
    16. Kreitmair, Ursula & Bower-Bir, Jacob, 2021. "Too different to solve climate change? Experimental evidence on the effects of production and benefit heterogeneity on collective action," Ecological Economics, Elsevier, vol. 184(C).
    17. Suchon, Rémi & Villeval, Marie Claire, 2019. "The effects of status mobility and group identity on trust," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 430-463.
    18. Cagala, Tobias & Glogowsky, Ulrich & Grimm, Veronika & Rincke, Johannes & Tuset-Cueva, Amanda, 2019. "Rent extraction and prosocial behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 709-723.
    19. Alós-Ferrer, Carlos & Garagnani, Michele, 2020. "The cognitive foundations of cooperation," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 71-85.
    20. Jean-Robert Tyran & Thomas Markussen & Louis Putterman, 2011. "Self-Organization for Collective Action: An Experimental Study of Voting on Formal, Informal, and No Sanction Regimes," Vienna Economics Papers vie1103, University of Vienna, Department of Economics.

    More about this item

    Keywords

    Public goods; dynamic incentives; minimum contribution rules; ratchet effect;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:20015. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.