Erroneous Beliefs Impede the Implementation of Cooperation-Inducing Mechanisms

Markus Dertwinkel-Kalt, Vincent Eulenberg, Christoph Feldhaus, Jonas Frey, Kevin Breuer, Ben Bruske, Flynn Fehre, Penelope Hoffmann, Cederik Höfs, Nico Klocke, Lucas Schnack, Florian Strunk, Moritz Thiele, Annika Walter, Julia Weinberg and Konstantin Zörner

No 11999, CESifo Working Paper Series from CESifo

Abstract: In social dilemmas, cooperation failures often arise due to the absence of mechanisms that prevent free-riding and enhance cooperation. Given the critical role these mechanisms play in sustaining cooperation, why are they so frequently missing? To explore this, we conducted an online experiment testing whether individuals choose to implement such cooperation-inducing mechanisms and why they might refrain from doing so. Participants were introduced to the rules of two public goods games, one of which includes a cooperation-inducing mechanism, while the other does not. Regarding the likelihood of successful cooperation, we found that participants were overly optimistic in the absence of the mechanism and overly pessimistic in its presence. As a result, a majority of subjects preferred the game without the cooperation-inducing mechanism. However, when we corrected participants' beliefs about the actual payoffs obtained in the two games, a majority shifted their preference toward the game with the cooperation-inducing mechanisms in place.

Keywords: free riding; equilibrium effects; misspecified beliefs; spectator design (search for similar items in EconPapers)
JEL-codes: C91 D01 D90 (search for similar items in EconPapers)
Date: 2025
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