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

Bettina Rockenbach and Irenaeus Wolff

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Public good; strategy method; experiment; public choice (search for similar items in EconPapers)
JEL-codes: C72 C9 C92 D7 D71 D72 (search for similar items in EconPapers)
Date: 2009-07-17
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-evo, nep-exp, nep-gth, nep-hpe and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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