Teaching Public Goods and Free Riding Using a Classroom Experiment Victoria Umanskaya Occidental College 11th Annual Economics Teaching Conference

The costs of including classroom experiments in your lesson plans – Fixed cost: the time used outside the classroom on developing games for multiple courses – Variable cost: necessary resources and the time used inside the classroom

A perfect classroom experiment Provides students with incentives to reveal their true economic behavior – A game with real, not hypothetical payoffs Can be conducted at a low (variable) cost: – Easy set up, transparent instructions – Doesn’t take up much class time, can be shortened or extended if needed – Hand run, doesn’t require special resources Versatile (lower average fixed cost): – Can be used in classes of different size and level with only slight modifications

Public goods and free-riding: a classroom experiment Each of the players starts with 5 dollars (or points) You can contribute any amount from 0 to 5 to the “matching fund”: I will double the total contributions to this fund I will then divide the doubled amount equally among all the players regardless of their contribution or the lack thereof. Your payoff = Dollars left from the initial $5 + Your share of the “matching fund”

Public goods and free-riding: experiment instructions We’ll play several rounds. Every round is a new game so you start every round with the new endowment of $5. In each round, you’ll be asked to report your contribution to the matching fund. You can either respond at PollEv.com/vumanskaya or text VUMANSKAYA to once to join, then text in each round A for 5 points, B for 4 points, C for 3 points, D for 2 points, E for 1 point, F for 0 points.

Public goods and free-riding: experiment results ROUNDTOTAL CONTRIBUTIONSYOUR SHARE OF MATCHING FUND

Possible discussion points Free-riding and inefficient provision of public goods: – Did anyone start by contributing all 5 points? Why? – Did anyone start by contributing 0 points? Why? Possibility of cooperation and the repeated nature of the game The effect of the “provision points” on the level of contributions

Afterthoughts: real payoffs The next best thing after actual dollars are grades! Students play for bonus points added to their assignment or test scores.

Afterthoughts: versatility ECON 101: play a single round, only discuss free-riding and under-provision of public goods in a free market. Larger class, students play in groups. Environmental Economics: multiple rounds with changing settings; frame the discussion in terms of environmental quality. Smaller class, each students plays for him/herself. Intermediate Micro: repeated games, changing settings. Discuss the nature of public goods, Nash equilibrium, one shot vs. repeated game, trigger strategies. Public Economics, Game theory?

Afterthoughts: low costs No resources, the length of the game can be easily adjusted. To find total contributions in each round and record results (bonus points): – ECON 101: fewer players (groups), one round  use white boards, take pictures to record each group’s contribution – Upper-division classes: more players, multiple rounds  use PollEverywhere and record sheet if using a free version