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The Good of the Few: Reciprocal Acts and the Provision of a Public Bad

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Abstract

People trade favors when doing so increases efficiency. Will they when it reduces efficiency, such as in political logrolling? We introduce the "Stakeholder Public Bad" game, in which common fund contributions increase one person's earnings (the "Stakeholder") while reducing others' earnings and overall efficiency. The Stakeholder position rotates through all group members or just alternates among two people (making it easier to form a coalition). High Stakeholder rewards provide a lever for reciprocity: if someone contributes when another is Stakeholder, he may be rewarded with a gift when he becomes Stakeholder. Reciprocity is only possible when agents know others' roles and actions, so information provision may be pro- or anti-social. In a laboratory experiment, we combine a rotating or alternating asymmetry in payoffs with varying levels of information provision to examine pro- and anti-social reciprocity. We find that subjects in the Stakeholder role willingly sacrifice social welfare. We also see both anti-social and pro-social favor trading, particularly when coalition-forming is easier. Favor trading does not change the mean level of public bad provision. People who trade favors tend to be less risk averse.

Suggested Citation

  • Sarah Jacobson & Jason Delaney, 2012. "The Good of the Few: Reciprocal Acts and the Provision of a Public Bad," Department of Economics Working Papers 2014-03, Department of Economics, Williams College, revised Jun 2015.
  • Handle: RePEc:wil:wileco:2014-03
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    Cited by:

    1. Dekel, Sagi & Fischer, Sven & Zultan, Ro’i, 2017. "Potential Pareto Public Goods," Journal of Public Economics, Elsevier, vol. 146(C), pages 87-96.

    More about this item

    Keywords

    reciprocity; public bad; logrolling; social preferences; externalities; public good;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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