This event was cancelled and has not taken place.

Claudia Keser, Professor at the University of Göttingen (Germany), CIRANO Associated Researcher and Fellow, will present her work during a lunchtime seminar at CIRANO.

Abstract:

Voluntary CO2 reduction in large-group experiments

Joachim Weimann, Jeannette Brosig-Koch, Timo Heinrich, Heike Hennig-Schmidt, Claudia Keser

In a recently published paper, Weimann et al. (2019, European Economic Review) examined voluntary contributions to the financing of a public good in large groups with a small marginal per capita return (MPCR) of the public investment. We found that groups with 100 players and an MPCR of 0.04 contributed about as much as groups with 8 players and an MPCR of 0.25. However, the large groups showed significantly lower contributions, when the MPCR was as low as 0.02. We explained this by the “saliency” of the advantages of mutual cooperation, which depends on the interplay of group size and the MPCR.

Conducting experiments with large groups and a small MPCR was a first step to increase the external validity of public-good experiments. However, important differences remain between the experimental economics laboratory and reality. In the lab, we define the conditions under which cooperation may occur (including the saliency of the cooperation interest) in subjects’ payoff functions. In real public goods, such payoff functions do not exist. If saliency of mutual benefits is important for cooperation, what are the implications for real public goods?

Consider the public good “CO2 reduction”, which concerns every individual on the planet (N = 7 billion people). The MPCR of an individual contribution to CO2 reduction is close to zero. It has to be larger than 1/N, though. Otherwise, the provision of this public good would not be in the social interest. In a lab experiment, in which participants can either keep their endowment or contribute it to CO2 reduction, the MPCR for the participants is zero. This is because nobody receives a monetary payoff from investment in the public good. The question that arises is, which game will the subjects actually play? Will they consider the other experiment participants as their reference group or will they consider all people concerned by CO2 reduction, independently of whether they participate in the experiment or not? Do subjects’ prior experiences with the real-public good matter, when they make their decisions in the lab?

In a series of experiments, we observe that subjects care little about others’ decisions in the experiment and make remarkably stable contributions. The salience of the cooperation interest seems to be determined by factors outside the lab. Thus, experimental results on public-good experiments should only be used with caution, when real public-good problems are analyzed.  However, they might be combined with other types of experiments measuring the willingness to pay for climate change (e.g., Diederich & Goeschl 2014, Environmental and Resource Economics).