Positional concerns in public goods games

Douadia Bougherara (1) , Sandrine Costa (2) , Gilles Grolleau (3) , Lisette Ibanez (2)

1 SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires
2 LEF - Laboratoire d'Economie Forestière
3 LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée

When asked to pick which of the two states of the world they would prefer to live in (A: Your current early income is $55,000; others earn $25,000 or B: Your current early income is $100,000; others earn $200,000 ) 56% of respondents preferred a world in which they had half the real purchasing power, as long as their relative income position was high (Solnick and Hemenway, 1998). In other words, some people care for their relative position. Although such motivations for purchase have been identified early (e.g., Veblen, 1899; Hirsch, 1976; Frank, 1985; Alpizar et al., 2005), theoretical and empirical investigations about their importance in relation to public goods remain scarce (e.g., Solnick and Hemenway, 2005). We propose an economic model and an experimental design enabling to reveal the existence of positional concerns in individuals' contributions to a public good. Individuals may have (i) positive positional concerns if they gain utility from contributing more than the average contribution, or (ii) negative positional concerns if they gain utility from contributing less than the average contribution. A sizeable theoretical or experimental literature devotes attention to multiple explanations for positive contributions to public goods (e.g., warm-glow, reciprocity [Croson, 2007]). Disentangling positional motivations from other motivations such as reciprocity constitute a challenge. In our theoretical model of contribution to a public good, we consider individuals motivated by reciprocity and relative standing. First, one's contribution may induce (or deter) others in the community to participate in the public good in the following period (incentive effect). Second, one's contribution may secure a certain position in the community as being a larger or lower contributor than the average contributor in the community (positional effect). The incentive and positional effects will interact. Let us suppose that the incentive effect is negative. When increasing his contribution, individual i will expect a decrease in others' contributions. Assume further that individual i has simultaneously positive positional concerns (deriving utility from contributing more than the average contribution). This will trigger the incentive of individual i to contribute more, thus inducing others to contribute less and securing a higher position in the group. On the other hand, if we assume that individual i has negative positional concerns (deriving utility from contributing less than the average contribution), this will trigger the incentive of individual i to contribute less, thus inducing others to contribute more and securing to the individual a lower position in the group. On the other extreme, suppose the incentive effect is positive. When increasing his contribution, individual i will expect an increase in others' contributions. Then, the behavior of individual i will depend on the magnitude of the incentive effect as compared to the positional effect. Experiments in the laboratory provide a unique setting for controlling the variables of interest of our economic model. We use two experimental designs: a partner design where individuals are associated to the same group from period to period and a stranger design where individuals are randomly re-matched at each period with other individuals to form a group. While the partner design includes both incentive and positional effects, the stranger design should include only positional effects. In the stranger design, individuals will not play with the same other players from one period to another and will try only to secure a certain position and not to induce a certain contribution behavior. To investigate these two effects and their We find empirical evidence of positional concerns in public good games. We find that (i) There is a significant positive incentive effect only in the partner treatment. When incentive effects are present (partner treatment), individuals adapt their contribution according to the beliefs on how their contribution may induce (or deter) others in the community to participate in the public good in the following period. (ii) Individuals have positional concerns in both in the partner and stranger treatments. (iii) The positional effect is less important in the partner treatment than in the stranger one. Positional concerns might be counterbalanced by reciprocity concerns. In the partner treatment, the individual can adopt punishment or reward behavior which reduce the positional effect.

Mots clés: PUBLIC GOOD; POSITION; CONSUMER BEHAVIOR; EXPERIMENT

Domaines: Sciences agricoles

Douadia Bougherara, Sandrine Costa, Gilles Grolleau, Lisette Ibanez. Positional concerns in public goods games. ESA 2008 European Regional meeting, Economic Science Association (ESA). INT., Sep 2008, Lyon, France. 16 p. ⟨hal-01072341⟩