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Inequity and risk aversion in sequential public good games

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  • Sabrina Teyssier

Abstract

This paper analyzes which type of intrinsic preferences drive an agent's behavior in a sequential public good game depending on whether the agent is first or second mover. Theoretical predictions are based on heterogeneity of individuals in terms of social and risk preferences. We modelize preferences according to the inequity aversion model of Fehr and Schmidt (1999) and to the assumption of constant relative risk aversion. Risk aversion is signiï¬ cantly and negatively correlated with the contribution decision of ï¬ rst movers. Second movers with sufficiently high advantageous inequity aversion free-ride less and reciprocate more than others. Both results are predicted by our model. Nevertheless, no effect of disadvantageous inequity aversion of ï¬ rst movers is found in the data while theory predicted it. Our results underline the importance of taking into account the order of agents' play to correctly understand which type of preferences influences cooperation in voluntary contribution mechanisms. They suggest that individuals' behavior can be consistent between different experimental games.
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  • Sabrina Teyssier, 2012. "Inequity and risk aversion in sequential public good games," Public Choice, Springer, vol. 151(1), pages 91-119, April.
    • Handle: RePEc:kap:pubcho:v:151:y:2012:i:1:p:91-119
    DOI: 10.1007/s11127-010-9735-1
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    More about this item

    Keywords

    Inequity aversion; Risk aversion; Public good game; Conditional cooperation; Strategic uncertainty; C72; C91; D63; D81; H41;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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