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One, Two, Many—Insensitivity to Group Size in Games with Concentrated Benefits and Dispersed Costs

Author

Listed:
  • Heiner Schumacher
  • Iris Kesternich
  • Michael Kosfeld
  • Joachim Winter

Abstract

We experimentally analyse distributional preferences when a decider chooses the provision of a good that benefits herself or a receiver, and creates costs for a group of payers. The treatment variation is the number of payers. We observe that subjects provide the good even if there are many payers so that the costs of provision exceed the benefits by far. This result holds regardless of whether the provision increases the decider’s payoff or not. Intriguingly, it is not only selfish or maximin types who provide the good. Rather, we show that a substantial fraction of subjects are “insensitive to group size”: they reveal to care about the payoff of all parties, but attach the same weight to small and large groups so that they ignore large provision costs that are dispersed among many payers. Our results have important consequences for the approval of policies with concentrated benefits and large, dispersed cost, as well as the analysis of ethical behaviour, medical decision-making, and charity donations.

Suggested Citation

  • Heiner Schumacher & Iris Kesternich & Michael Kosfeld & Joachim Winter, 2017. "One, Two, Many—Insensitivity to Group Size in Games with Concentrated Benefits and Dispersed Costs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(3), pages 1346-1377.
    • Handle: RePEc:oup:restud:v:84:y:2017:i:3:p:1346-1377.
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    File URL: http://hdl.handle.net/10.1093/restud/rdw043
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    Cited by:

    1. Weimann, Joachim & Brosig-Koch, Jeannette & Heinrich, Timo & Hennig-Schmidt, Heike & Keser, Claudia, 2019. "Public good provision by large groups – the logic of collective action revisited," European Economic Review, Elsevier, vol. 118(C), pages 348-363.
    2. Razi Farukh & Matthias Heinz & Anna Kerkhof & Heiner Schumacher, 2023. "Attitudes to Migration and the Market for News," CESifo Working Paper Series 10605, CESifo.
    3. Hart, Oliver & Zingales, Luigi, 2017. "Companies Should Maximize Shareholder Welfare Not Market Value," Journal of Law, Finance, and Accounting, now publishers, vol. 2(2), pages 247-275, November.
    4. Davide Pace & Joël van der Weele, 2020. "Curbing Carbon: An Experiment on Uncertainty and Information about CO2 emissions," Tinbergen Institute Discussion Papers 20-059/I, Tinbergen Institute.
    5. Choi, S. & Goyal, G. & Moisan, F., 2020. "Large Scale Experiments on Networks: A New Platform with Applications," Cambridge Working Papers in Economics 2063, Faculty of Economics, University of Cambridge.
    6. Christian Ewerhart & Robertas Zubrickas, 2019. "Social preference and group identity in the financial cooperative," ECON - Working Papers 332, Department of Economics - University of Zurich.
    7. Verboven, Frank & Karle, Heiko & Kerzenmacher, Florian & Schumacher, Heiner, 2022. "Search Costs and Diminishing Sensitivity," CEPR Discussion Papers 17399, C.E.P.R. Discussion Papers.
    8. Werner, Tobias & Hillenbrand, Adrian & Winter, Fabian, 2020. "Volunteering at the Workplace under Incomplete Information: Team Size Does Not Matter," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224519, Verein für Socialpolitik / German Economic Association.
    9. Adrian Hillenbrand & Tobias Werner & Fabian Winter, 2020. "Volunteering at the Workplace under Incomplete Information: Teamsize Does Not Matter," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2020_04, Max Planck Institute for Research on Collective Goods.
    10. Dertwinkel-Kalt, Markus & Köster, Mats, 2020. "Attention to online sales: The role of brand image concerns," DICE Discussion Papers 335, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. Simon Reif & Lucas Hafner & Michael Seebauer, 2020. "Physician Behavior under Prospective Payment Schemes—Evidence from Artefactual Field and Lab Experiments," IJERPH, MDPI, vol. 17(15), pages 1-37, July.
    12. Stehr, Frauke & Werner, Peter, 2021. "Making Up for Harming Others — An Experiment on Voluntary Compensation Behavior," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242396, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Social preferences; Distribution games; Concentrated benefits and dispersed costs; Insensitivity to group size;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H00 - Public Economics - - General - - - General

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