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Institution design in social dilemmas: How to design if you must?

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  • Rockenbach, Bettina
  • Wolff, Irenaeus

Abstract

Considerable experimental evidence has been collected on how to solve the public-good dilemma. In a 'first generation' of experiments, this was done by presenting subjects with a pre-specified game out of a huge variety of rules. A 'second generation' of experiments introduced subjects to two different environments and had subjects choose between those. The present study is part of a 'third generation', asking subjects not only to choose between two environments but to design their own rule sets for the public-good problem. Whereas preceding 'third-generation' experiments had subjects design and improve their strategies for a specified game, this study is the first to make an attempt at answering the question of how people would shape their environment to solve the public-good dilemma were they given full discretion over the rules of the game. We explore this question of endogenous institution design in an iterated design-and-play procedure. We observe a strong usage of punishment and redistribution components, which diminishes over time. Instead, subjects successfully contextualize the situation. Interestingly, feedback on fellow-players’ individual behavior tends to be rendered opaque. On average, rules do improve with respect to the welfare they elicit, albeit only to a limited degree.

Suggested Citation

  • Rockenbach, Bettina & Wolff, Irenaeus, 2009. "Institution design in social dilemmas: How to design if you must?," MPRA Paper 16922, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:16922
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    Cited by:

    1. Sääksvuori, Lauri, 2013. "Voluntary formation of centralized sanctioning institutions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 44(C), pages 150-159.
    2. James Andreoni & Laura K. Gee, 2011. "Gun For Hire: Does Delegated Enforcement Crowd out Peer Punishment in Giving to Public Goods?," NBER Working Papers 17033, National Bureau of Economic Research, Inc.
    3. 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 1103, University of Vienna, Department of Economics.
    4. Page, Talbot & Putterman, Louis & Garcia, Bruno, 2013. "Voluntary contributions with redistribution: The effect of costly sanctions when one person's punishment is another's reward," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 34-48.
    5. Róbert F. Veszteg & Erita Narhetali, 2010. "Public-good games and the Balinese," International Journal of Social Economics, Emerald Group Publishing, vol. 37(9), pages 660-675, August.

    More about this item

    Keywords

    Public good; strategy method; experiment; public choice;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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