Conditional Cooperation With Negative Externalities – An Experiment

Christoph Engel and Lilia Zhurakhovska ()
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Lilia Zhurakhovska: Max Planck Institute for Research on Collective Goods, Bonn

No 2012_02, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Empirically, the commons are not as tragic as standard theory predicts. The predominant explanation for this finding is conditional cooperation. Yet many real life situations involve insiders, who are directly affected by a dilemma, and outsiders, who may be harmed if the insiders overcome the dilemma. The quintessential illustration is oligopoly. If insiders overcome their dilemma and collude, this inflicts harm on the opposite market side. In our experiment, harm on outsiders significantly reduces conditional cooperation of insiders. We can exclude that this result is driven by inequity aversion, reciprocity or efficiency seeking. Only guilt aversion can rationalize our findings, with guilt being most pronounced if the active insiders not only inflict harm on the outsider, but increase their own payoff at the expense of the outsider.

Keywords: efficiency; Conditional Cooperation; Inequity Aversion; negative externalities; prisoner’s dilemma; Beliefs; guilt aversion (search for similar items in EconPapers)
Date: 2012-01, Revised 2014-08
New Economics Papers: this item is included in nep-evo, nep-exp, nep-gth, nep-hpe and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Journal Article: Conditional cooperation with negative externalities – An experiment (2014)
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