Participants in this experiment are given an endowments of "tokens" that
may be kept or contributed to a public good. The value of a token kept is typically specified to be
greater than the "internal return" that the individual receives from making the contribution, so there is a private
incentive not to contribute. However, contributions produce an "external return"
to the others in the group, and such contributions are socially optimal
when the total benefit to all exceeds the value of keeping a token.
Contributions may increase dramatically when participants can administer
costly punishments to others. The public goods game has fascinated social scientists because the conflict between social and private
incentives provides a platform for studying altruism, reciprocity,
demographic effects, etc. The fear that "free riding" may generate low levels of public good provision has been
discussed since Adam Smith's famous observations about street lights.
Copyright 2009, Charles Holt, Please report problems and suggestions:
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Vecon Lab - April 21, 2019