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

Rockenbach, Bettina and Wolff, Irenaeus (2009): Institution design in social dilemmas: How to design if you must?

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Public good; strategy method; experiment; public choice
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments; D - Microeconomics > D7 - Analysis of Collective Decision-Making; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice ; Clubs ; Committees ; Associations; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C92 - Laboratory, Group Behavior; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games

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