Answer to Question #173812 in Economics for Sarah

Question

In experiments in which participants voluntarily contribute to the provision of a public good, we often find a reduction in contributions in successive rounds of the experiment. We can explain this as

Evidence of participants working out the Nash equilibrium outcome of the voluntary contribution game.

Evidence of participants learning how to play the game more effectively.

Evidence of participants reaching satiation and not wanting such high levels of the public good.

Evidence of participants reducing cooperation to punish free riding.

Answer 1

1. People cooperate and punish in anonymous one-shot games where future benefits from cooperation, reputation effects, are excluded. This confirms the hypothesis of the existence of strong reciprocity in human behavior.

2. The effect of fading cooperation in games with repetitions is observed: at the beginning, the participants make high contributions, but with the increase in repetitions, the “reserve” of cooperation dries up - the stakes become significantly lower. The fading of cooperation is explained by the presence in the group of people with different motivations: the behavior of free riders with their purely individualistic motivation has a disappointing effect on participants who are inclined to cooperate.

3. Participants tend to punish those who contribute less.

4. Punishment increases and stabilizes cooperation at a higher level compared to experiments without punishment. This is confirmed by numerous experiments, although there are exceptions: punishment is ineffective if it is perceived as unfair. Experiments show that exogenous (imputed) norms of punishment are less effective.

5. In the context of a universal tax burden for all participants (the same mandatory contributions), the propensity for freeriding behavior is higher than in the case of “individualized” taxation, when the tax liability is determined in accordance with individual voluntary contributions. In this case, there is a convergence of individual contributions in the direction of their approximation to the optimal value and reduction of the deficit in financing public goods.

6. Tightening control over certain ways of avoiding income taxation can lead to compensatory expansion of the use of other opportunities for evasion and, in aggregate, to a decrease in tax revenues.