1. Outline  In-Class Experiment on the Provision of Public Good  Test of Free-Rider Hypothesis I: Marwell and Ames (1979)  Test of Free-Rider Hypothesis II: Marwell and Ames (1980)  Test of Free-Rider Hypothesis III: Issac and Walker (1988)

2. Public Good Experiments  Individual endowment is and n individuals in a group  Invest in Private and Public exchanges:  i’s returns from Private and Public exchanges are:  Individual’s utility function:

3. Basic Insight  If, then as n increases V i = MPCR (marginal per capital return) drops.  So it is unclear whether group size effect is due to changes in V i = MPCR or changes in group size n.

4. Three Possible Treatments  The effect of altering MPCR but holding n constant  The effect of altering n but adjusting G(.) function so that MPCR remains constant  The combination effect in which altering n also altering MPCR.

5. Experimental Design

6. Experimental Procedure  Participants faced two consecutive series of ten decision trials.  In one series, MPCR was 0.3 and in another MPCR was 0.75. Order was switched to counterbalance.  12 experimental sessions.

7. Basic Results: % of Strong Free Riders A person is called a strong free rider if her contribution to public good is less than 1/3 of her tokens Data from second series

8. Basic Results: % of Tokens Contributed Data from second series

9. End-Period Results Data from second series

10. Key Observations  Observation 1: Lowering the MPCR from 0.75 to 0.3 appears to increase significantly the incidence of free- rider behavior.  Observation 2: There are weak, if any, effects of changes in group size from four to ten (holding MPCR constant)

11. Intragroup Comparison I: Small Groups

12. Intragroup Comparison II: Small Groups

13. Combined Effect: Previous Experiment MPCR and Group Size

14. Summary