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Favor Trading in Public Good Provision

Ragan Petrie () and Sarah Jacobson ()

No 2013-03, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: Favor trading is common. We do something nice for someone and they do something nice in return. Several motives might underlie such behavior, including altruism, strategic motives, and direct or indirect positive reciprocity. It is not yet well-understood how these fit together to affect behavior, how they interact in various institutional structures, and how they play out over time. We use a laboratory experiment to study the elements and dynamics of favor trading in a particular setting: the private provision of a public good. In our experiment, giving subjects the ability to practice targeted reciprocity by making a simple, low-cost change in information provision increases contributions to the public good by 14%. Subjects reward group members who have previously been generous to them and withhold rewards from ungenerous group members. Strategic concerns cannot explain all of this behavior, and it must be at least partly due to direct reciprocity. When someone cannot directly benefit from favor trading, he gives much less to the public good. People thus excluded from the "circle of reciprocity" provide a clean and strict test of indirect reciprocity. Contrary to previous studies in the literature, we do not observe indirect reciprocity.

Keywords: public goods; direct and indirect reciprocity; experiment; peer-to-peer fundraising (search for similar items in EconPapers)
JEL-codes: C92 D01 H41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013-09
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-exp and nep-soc
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Related works:
Journal Article: Favor trading in public good provision (2014) Downloads
Working Paper: Favor Trading in Public Good Provision (2013) Downloads
Working Paper: Favor Trading in Public Good Provision (2012) Downloads
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