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Framing effects in public goods: Prospect Theory and experimental evidence

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  • Iturbe-Ormaetxe, Iñigo
  • Ponti, Giovanni
  • Tomás, Josefa
  • Ubeda, Luis

Abstract

This paper studies, both theoretically and experimentally, framing effects in the context of a public good game in which players have to make a costly contribution either (i) to achieve or (ii) not to lose a non-excludable monetary prize. Our protocol leads to public good provision (not deterioration) only if a certain contribution level is achieved. Since both frames differ with respect to the reference point, we apply Prospect Theory to derive testable predictions. In particular, Prospect Theory predicts--and our experimental evidence confirms--greater contribution in the "loss" ("gain") frame when the contribution threshold is high (low). We also estimate the parameters which better suit our experimental evidence and partly confirm previous results in the literature.

Suggested Citation

  • Iturbe-Ormaetxe, Iñigo & Ponti, Giovanni & Tomás, Josefa & Ubeda, Luis, 2011. "Framing effects in public goods: Prospect Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 72(2), pages 439-447, June.
  • Handle: RePEc:eee:gamebe:v:72:y:2011:i:2:p:439-447
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    References listed on IDEAS

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    Cited by:

    1. Böhm, Robert & Betsch, Cornelia & Korn, Lars, 2016. "Selfish-rational non-vaccination: Experimental evidence from an interactive vaccination game," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 183-195.
    2. Ispano, Alessandro & Schwardmann, Peter, 2017. "Cooperating Over Losses and Competing Over Gains: a Social Dilemma Experiment," Rationality and Competition Discussion Paper Series 23, CRC TRR 190 Rationality and Competition.
    3. Marie-Laure Cabon-Dhersin & Nathalie Etchart-Vincent, 2011. "Cooperation: the power of a single word? Some experimental evidence on wording and gender effects in a Game of Chicken," Working Papers hal-00741973, HAL.
    4. Farré Lidia & González Libertad & Ortega Francesc, 2011. "Immigration, Family Responsibilities and the Labor Supply of Skilled Native Women," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-48, June.
    5. Kölle, Felix & Gächter, Simon & Quercia, Simone, 2014. "The ABC of Cooperation in Voluntary Contribution and Common Pool Extraction Games," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100417, Verein für Socialpolitik / German Economic Association.
    6. Fosgaard, Toke R. & Hansen, Lars Gårn & Wengström, Erik, 2014. "Understanding the nature of cooperation variability," Journal of Public Economics, Elsevier, vol. 120(C), pages 134-143.
    7. Gerard, Francois, 2013. "What Changes Energy Consumption, and for How Long? New Evidence from the 2001 Brazilian Electricity Crisis," Discussion Papers dp-13-06, Resources For the Future.
    8. Francisco Martinez-Sanchez, 2011. "Collusion, competition and piracy," Applied Economics Letters, Taylor & Francis Journals, vol. 18(11), pages 1043-1047.
    9. Marisa Hidalgo-Hidalgo & Iñigo Iturbe-Ormaetxe, 2012. "Should we transfer resources from college to basic education?," Journal of Economics, Springer, vol. 105(1), pages 1-27, January.
    10. Hota, Ashish R. & Garg, Siddharth & Sundaram, Shreyas, 2016. "Fragility of the commons under prospect-theoretic risk attitudes," Games and Economic Behavior, Elsevier, vol. 98(C), pages 135-164.
    11. Inigo Iturbe-Ormaetxe & Giovanni Ponti & Josefa Tomás, 2015. "Some (Mis)facts about Myopic Loss Aversion," Working Papers CESARE 6/2015, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    12. repec:eee:gamebe:v:105:y:2017:i:c:p:329-348 is not listed on IDEAS
    13. Terzi, Ayse & Koedijk, Kees & Noussair, Charles N. & Pownall, Rachel, 2016. "Reference point heterogeneity," Other publications TiSEM 9ef0ddbd-8f52-4845-87b3-1, Tilburg University, School of Economics and Management.
    14. Güth Werner & Sääksvuori Lauri, 2012. "Provision of Multilevel Public Goods by Positive Externalities: Experimental Evidence," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-33, July.

    More about this item

    Keywords

    Public good provision Framing Prospect Theory;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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