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

Author

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  • 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," Review of Economic Studies, Oxford University Press, 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. Hafner, Lucas & Reif, Simon & Seebauer, Michael, 2017. "Physician behavior under prospective payment schemes: Evidence from artefactual field and lab experiments," FAU Discussion Papers in Economics 18/2017, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    3. Christian Ewerhart & Robertas Zubrickas, 2019. "Social preference and group identity in the financial cooperative," ECON - Working Papers 332, Department of Economics - University of Zurich.

    More about this item

    Keywords

    Social preferences; Distribution games; Concentrated benefits and dispersed costs; Insensitivity to group size;

    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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