1. Motivation This experiment was a public good experiment to see if groups contribute differently than individuals.  intermediate social structure This is an area which has had relatively little if any attention in the experimental economic literature. It also has a practical aspect example how regional trade agreements affects contributions to reductions in pollution as oppose to individual countries.

2. Literature Review PG experiment: group competition field PG experiment: (Starmer) social capital: references from Putnam (Julian) all papers (and ours): no enforcement/punishment mechanism, not reflected in payoff structure  purely psychological There is a general pattern found in public contribution games that between 40 -50% in period 1 and thereafter it decreases, with the number of repetitions, towards the free riding level. The final trial is always the lowest but is typically is still above the free riding level even though the game is finished.(Isaac, Walker and Williams 1994,Gachter and Renner 2003 and Gachter, Thoni and Herrmann 2008) The literature tried to solve the puzzle as to why people contribute towards the good without contributing the full amount. The social comparison theory emphasizes that people in group settings behave differently than in isolation. In particular, it assumes that people are motivated both to perceive and present themselves in a socially desirable way. To accomplish this, a person might react in a way that is closer to what he regards as the social norm than how he would act in isolation. (Levinger and Schneider, 1969)

3. Literature Review Psychological effects: Group identification, Insider/Outsider-effects – while the former would presumably lead to higher contribution (achieve a socially optimal outcome), the latter might rather decrease average contributions. Social capital: although trust is only one of several theoretical elements of social capital, it is most effectively build by experiencing interaction in social networks. Since the public good game requires trust in the action of others to achieve a social optimal outcome, this should increase average contributions. Shaun P. Hargreaves Heap and Daniel John Zizzo 2006.

4. Literature Review The psychological effect and social capital Overall, the welfare effects of groups are at best neutral and could be negative Shaun (P. Hargreaves Heap and Daniel John Zizzo 2006) George A. Akerlof and Rachel E. Kranton (2000), for instance, suggest that simply being able to identify with a group is itself an important source of individual well- being. This is principally what we shall try to analyse.

5. Design H0: there are no differences in behavior due to the intermediate group structure. H1: there are differences…

6. Design IGGI Preference control / repetition bias PSYCHOLOGICAL GROUP EFFECT Individual decision Group decision Individual decision Repetition control / preference bias Preference control / repetition bias Revelation Payoffs Revelation

7. Design – put on other slide Repetition bias Changing beliefs about others' contributions (Imperfect) conditional cooperation (Gaechter paper) Lack of enforcement/ punishment Declining contributions Preference bias Unequal distribution of free riding / conditional cooperation / social preferences between groups Confunding group effect with heterogenous preferences

8. Results (between treatments)

9. Results (stage 1) Higher mean for individual setting (3.78) than for group setting (2.33) Strong clustering of group contributions, almost uniform contribution of individual contributions No significant difference in distributions (Mann-Whitney)

10. Results (within treatment)

11. Results (within IG) Average contributions: –Overall: 3.61 –Individual: 3.78 –Group: 3.44 No significant difference

12. Results (within treatment)

13. Results (within GI) Average contributions: –Overall: 1.83 –Individual: 1.33 –Group: 2.33 No significant difference

14. Results: Additional remarks Weakly significant mean-difference across treatment groups (t = -1.64)  heterogenous preference bias? Weakly significant difference of individual contribution across treatments in the individual setting (z = -1.81)  preference and repetition bias?

15. Conclusion Limitations: –subject knew each other, were familiar with experimental design and game theoretic prediction –small sample size (preference bias) –Resources not sufficient to investigate further group effects No significant differences between group/individual contributions Slight hint of repetition bias: across- treatment comparison more meaningful

16. Literature Review Andreoni 1988 runs a PG game to try to solve the puzzle. Finds neither the learning hypothesis or a rational strategy can explain the puzzle. Fehr and Schmidt 1999 model Inequality aversion people resist inequitable outcomes meaning they are willing to give up some material payoff to move in a direction of more equitable outcomes. This has lead to beliefs that people get utility from the fact others are benefitting ‘warm glow’.

17. Literature Review The social comparison theory emphasizes that people in group settings behave differently than in isolation. In particular, it assumes that people are motivated both to perceive and present themselves in a socially desirable way. To accomplish this, a person might react in a way that is closer to what he regards as the social norm than how he would act in isolation. (Levinger and Schneider, 1969) The persuasive argument theory, deliberation drives group decisions in a particular direction because it is more persuasive. A related explanation of group shifts is that people with certain preferences tend to be more persuasive than others (for example, more selfish individuals are also more aggressive in deliberation). (Burnstein et al., 1973; Brown, 1974)

18. Results (between treatments)

19. Results (stage 2) Group mean (3.44) higher individual mean (1.33) Strong clustering of individual contributions around 0, rather uniform group contributions Weakly significant (10 %-level) difference in distributions (Mann-Whitney)