IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v186y2021icp251-268.html
   My bibliography  Save this article

The ratchet effect in social dilemmas

Author

Listed:
  • Gallier, Carlo
  • Sturm, Bodo

Abstract

In this paper, we investigate whether dynamic incentive schemes lead to a ratchet effect in a social dilemma. We test whether subjects strategically restrict their contribution levels at the beginning of a cumulative public goods game in order to avoid high obligations in the future and how this affects efficiency. The incentive schemes prescribe that individual contributions have to be at least as high as, or strictly higher than, contributions in the previous period. We observe a substantial and statistically significant ratchet effect. Participants reduce their public good contribution levels at the beginning of the game, anticipating that higher contributions imply higher minimum contribution levels in the future, which increases the risk of being exploited by free-riders. While the dynamic incentive schemes lead to increasing contribution levels over the course of the game, this increase is not strong enough to compensate the efficiency losses at the beginning.

Suggested Citation

  • Gallier, Carlo & Sturm, Bodo, 2021. "The ratchet effect in social dilemmas," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 251-268.
    • Handle: RePEc:eee:jeborg:v:186:y:2021:i:c:p:251-268
    DOI: 10.1016/j.jebo.2021.03.022
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268121001220
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2021.03.022?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Leslie M. Marx & Steven A. Matthews, 2000. "Dynamic Voluntary Contribution to a Public Project," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 327-358.
    2. Duffy, John & Ochs, Jack & Vesterlund, Lise, 2007. "Giving little by little: Dynamic voluntary contribution games," Journal of Public Economics, Elsevier, vol. 91(9), pages 1708-1730, September.
    3. Cubitt, Robin & Gächter, Simon & Quercia, Simone, 2017. "Conditional cooperation and betrayal aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 110-121.
    4. Cherry, Todd L. & Kroll, Stephan & Shogren, Jason F., 2005. "The impact of endowment heterogeneity and origin on public good contributions: evidence from the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 57(3), pages 357-365, July.
    5. Astrid Dannenberg & Andreas Lange & Bodo Sturm, 2014. "Participation and Commitment in Voluntary Coalitions to Provide Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 257-275, April.
    6. Gary Charness & Peter Kuhn & Marie Claire Villeval, 2011. "Competition and the Ratchet Effect," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 513-547.
    7. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
    8. Anat R. Admati & Motty Perry, 1991. "Joint Projects without Commitment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 259-276.
    9. Andreoni, James, 1993. "An Experimental Test of the Public-Goods Crowding-Out Hypothesis," American Economic Review, American Economic Association, vol. 83(5), pages 1317-1327, December.
    10. Maoliang Ye & Jie Zheng & Plamen Nikolov & Sam Asher, 2020. "One Step at a Time: Does Gradualism Build Coordination?," Management Science, INFORMS, vol. 66(1), pages 113-129, January.
    11. Dorsey, Robert E, 1992. "The Voluntary Contributions Mechanism with Real Time Revisions," Public Choice, Springer, vol. 73(3), pages 261-282, April.
    12. Oprea, Ryan & Charness, Gary & Friedman, Daniel, 2014. "Continuous time and communication in a public-goods experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 212-223.
    13. Choi, Syngjoo & Gale, Douglas & Kariv, Shachar, 2008. "Sequential equilibrium in monotone games: A theory-based analysis of experimental data," Journal of Economic Theory, Elsevier, vol. 143(1), pages 302-330, November.
    14. Jason Aimone & Sheryl Ball & Brooks King-Casas, 2015. "The Betrayal Aversion Elicitation Task: An Individual Level Betrayal Aversion Measure," PLOS ONE, Public Library of Science, vol. 10(9), pages 1-12, September.
    15. Todd Sandler, 1998. "Global and regional public goods: a prognosis for collective action," Fiscal Studies, Institute for Fiscal Studies, vol. 19(3), pages 221-247, August.
    16. Anderson, Lisa R. & Mellor, Jennifer M. & Milyo, Jeffrey, 2008. "Inequality and public good provision: An experimental analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(3), pages 1010-1028, June.
    17. Iris Bohnet & Fiona Greig & Benedikt Herrmann & Richard Zeckhauser, 2008. "Betrayal Aversion: Evidence from Brazil, China, Oman, Switzerland, Turkey, and the United States," American Economic Review, American Economic Association, vol. 98(1), pages 294-310, March.
    18. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    19. Ben Lockwood & Jonathan P. Thomas, 2002. "Gradualism and Irreversibility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 339-356.
    20. Johannes Diederich & Timo Goeschl, 2014. "Willingness to Pay for Voluntary Climate Action and Its Determinants: Field-Experimental Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(3), pages 405-429, March.
    21. repec:ebl:ecbull:v:3:y:2008:i:23:p:1-11 is not listed on IDEAS
    22. Jessica F. Green & Thomas Sterner & Gernot Wagner, 2014. "A balance of bottom-up and top-down in linking climate policies," Nature Climate Change, Nature, vol. 4(12), pages 1064-1067, December.
    23. Hugh Macartney, 2016. "The Dynamic Effects of Educational Accountability," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 1-28.
    24. Dawes, Robyn M. & Orbell, John M. & Simmons, Randy T. & Van De Kragt, Alphons J. C., 1986. "Organizing Groups for Collective Action," American Political Science Review, Cambridge University Press, vol. 80(4), pages 1171-1185, December.
    25. Chaudhuri, Ananish, 1998. "The ratchet principle in a principal agent game with unknown costs: an experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 291-304, November.
    26. Jennifer Zelmer, 2003. "Linear Public Goods Experiments: A Meta-Analysis," Experimental Economics, Springer;Economic Science Association, vol. 6(3), pages 299-310, November.
    27. Fisher, Joseph & Isaac, R. Mark & Schatzberg, Jeffrey W & Walker, James M., 1995. "Heterogenous Demand for Public Goods: Behavior in the Voluntary Contributions Mechanism," Public Choice, Springer, vol. 85(3-4), pages 249-266, December.
    28. Werner Güth & Maria Vittoria Levati & Andreas Stiehler, "undated". "Privately Contributing to Public Goods over Time - An Experimental Study -," Papers on Strategic Interaction 2002-01, Max Planck Institute of Economics, Strategic Interaction Group.
    29. Gronberg, Timothy J. & Luccasen, R. Andrew & Turocy, Theodore L. & Van Huyck, John B., 2012. "Are tax-financed contributions to a public good completely crowded-out? Experimental evidence," Journal of Public Economics, Elsevier, vol. 96(7-8), pages 596-603.
    30. Pavel Diev & Walid Hichri, 2008. "Dynamic voluntary contributions to a discrete public good: Experimental evidence," Economics Bulletin, AccessEcon, vol. 3(23), pages 1-11.
    31. Keser, Claudia, 1996. "Voluntary contributions to a public good when partial contribution is a dominant strategy," Economics Letters, Elsevier, vol. 50(3), pages 359-366, March.
    32. Gale, Douglas, 2001. "Monotone Games with Positive Spillovers," Games and Economic Behavior, Elsevier, vol. 37(2), pages 295-320, November.
    33. Eckel, Catherine C. & Grossman, Philip J. & Johnston, Rachel M., 2005. "An experimental test of the crowding out hypothesis," Journal of Public Economics, Elsevier, vol. 89(8), pages 1543-1560, August.
    34. Gale, Douglas, 1995. "Dynamic Coordination Games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 1-18, January.
    35. Oran R. Young, 2016. "The Paris Agreement: Destined to Succeed or Doomed to Fail?," Politics and Governance, Cogitatio Press, vol. 4(3), pages 124-132.
    36. Ananish Chaudhuri, 2011. "Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 47-83, March.
    37. Daniel Friedman & Ryan Oprea, 2012. "A Continuous Dilemma," American Economic Review, American Economic Association, vol. 102(1), pages 337-363, February.
    38. Cardella, Eric & Depew, Briggs, 2018. "Output restriction and the ratchet effect: Evidence from a real-effort work task," Games and Economic Behavior, Elsevier, vol. 107(C), pages 182-202.
    39. Eloi Laurent, 2017. "Why Paris Did Not Solve the Climate Dilemma," SciencePo Working papers Main hal-03409169, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alt, Marius & Gallier, Carlo & Kesternich, Martin & Sturm, Bodo, 2023. "Collective minimum contributions to counteract the ratchet effect in the voluntary provision of public goods," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    2. Gerlagh, Reyer & van der Heijden, Eline, 2024. "Going green: Framing effects in a dynamic coordination game," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 108(C).
    3. Carlo Gallier & Axel Ockenfels & Bodo Sturm, 2024. "Klimakonferenz in Baku: Mehr Reziprozität in der internationalen Klimapolitik," ECONtribute Policy Brief Series 064, University of Bonn and University of Cologne, Germany.
    4. Nisvan Erkal & Boon Han Koh & Nguyen Lam, 2023. "Using Milestones as a Source of Feedback in Teamwork: Insights from a Dynamic Voluntary Contribution Mechanism," Discussion Papers 2310, University of Exeter, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gallier, Carlo & Sturm, Bodo, 2020. "The ratchet effect in social dilemmas," ZEW Discussion Papers 20-015, ZEW - Leibniz Centre for European Economic Research.
    2. Maoliang Ye & Jie Zheng & Plamen Nikolov & Sam Asher, 2020. "One Step at a Time: Does Gradualism Build Coordination?," Management Science, INFORMS, vol. 66(1), pages 113-129, January.
    3. Eungik Lee & Andrew Choi & Syngjoo Choi & Yves Guéron, 2023. "Irreversibility And Monitoring In Dynamic Games: Experimental Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 387-412, February.
    4. Andreas Löschel & Dirk Rübbelke, 2014. "On the Voluntary Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 195-204, April.
    5. Annarita Colasante & Alberto Russo, 2017. "Voting for the distribution rule in a Public Good Game with heterogeneous endowments," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(3), pages 443-467, October.
    6. Felix Koelle, 2012. "Heterogeneity and Cooperation in Privileged Groups: The Role of Capability and Valuation on Public Goods Provision," Cologne Graduate School Working Paper Series 03-08, Cologne Graduate School in Management, Economics and Social Sciences.
    7. Marco Battaglini & Salvatore Nunnari & Thomas R. Palfrey, 2016. "The Dynamic Free Rider Problem: A Laboratory Study," American Economic Journal: Microeconomics, American Economic Association, vol. 8(4), pages 268-308, November.
    8. Nisvan Erkal & Boon Han Koh & Nguyen Lam, 2023. "Using Milestones as a Source of Feedback in Teamwork: Insights from a Dynamic Voluntary Contribution Mechanism," Discussion Papers 2310, University of Exeter, Department of Economics.
    9. Tan, Jonathan H.W. & Breitmoser, Yves & Bolle, Friedel, 2015. "Voluntary contributions by consent or dissent," Games and Economic Behavior, Elsevier, vol. 92(C), pages 106-121.
    10. Choi, Syngjoo & Gale, Douglas & Kariv, Shachar & Palfrey, Thomas, 2011. "Network architecture, salience and coordination," Games and Economic Behavior, Elsevier, vol. 73(1), pages 76-90, September.
    11. Gangadharan, Lata & Nikiforakis, Nikos & Villeval, Marie Claire, 2017. "Normative conflict and the limits of self-governance in heterogeneous populations," European Economic Review, Elsevier, vol. 100(C), pages 143-156.
    12. He, Simin & Zhu, Xun, 2023. "Real-time monitoring in a public-goods game," Games and Economic Behavior, Elsevier, vol. 142(C), pages 454-479.
    13. Cason, Timothy N. & Zubrickas, Robertas, 2019. "Donation-based crowdfunding with refund bonuses," European Economic Review, Elsevier, vol. 119(C), pages 452-471.
    14. Markussen, Thomas & Sharma, Smriti & Singhal, Saurabh & Tarp, Finn, 2021. "Inequality, institutions and cooperation," European Economic Review, Elsevier, vol. 138(C).
    15. Lindokuhle Njozela & Justine Burns & Arnim Langer, 2018. "The Effects of Social Exclusion and Group Heterogeneity on the Provision of Public Goods," Games, MDPI, vol. 9(3), pages 1-21, August.
    16. Lohse, Johannes, 2015. "Cooperation at a discount - Will I give away your money?," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113151, Verein für Socialpolitik / German Economic Association.
    17. Schüssler, Katharina & Schüssler, Michael & Mühlbauer, Daniel, 2018. "Individual Differences and Contribution Sequences in Threshold Public Goods," Rationality and Competition Discussion Paper Series 88, CRC TRR 190 Rationality and Competition.
    18. Carlo Gallier & Martin Kesternich & Bodo Sturm, 2017. "Voting for Burden Sharing Rules in Public Goods Games," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 535-557, July.
    19. Peter Martinsson & Emil Persson, 2019. "Public Goods and Minimum Provision Levels: Does the Institutional Formation Affect Cooperation?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(4), pages 1473-1499, October.
    20. Koessler, Ann-Kathrin & Müller, Julia & Zitzelsberger, Sonja, 2023. "Asymmetric heterogeneities and the role of transfers in a public goods experiment," European Economic Review, Elsevier, vol. 159(C).

    More about this item

    Keywords

    Public goods; Dynamic incentives; Minimum contribution levels; Ratchet effect;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:186:y:2021:i:c:p:251-268. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.