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Externalities in appropriation: responses to probabilistic losses

Author

Listed:
  • Esther Blanco

    (University of Innsbruck
    Indiana University)

  • Tobias Haller

    (University of Innsbruck)

  • James M. Walker

    (Indiana University
    Indiana University)

Abstract

Using an appropriation game setting, we examine individual responses to changes in a groups’ vulnerability to a probabilistic loss (L) of a public good. The probabilistic loss parameter entails losing 10, 50 or 90% of the value of the public good that is maintained through cooperation, where the likelihood of the loss decreases in total group cooperation. By design, the expected marginal net benefits to an individual and the expected harm to others depends endogenously on the individuals’ expectations of group cooperation and exogenously on the magnitude of the loss parameter. We find that individual cooperation is greater when forecasts of total group cooperation are greater and where the magnitude of the probabilistic loss is larger. There is, however, an interesting asymmetry in responses by two subgroups. Subjects who are pessimistic regarding total group cooperation decrease cooperation the higher the magnitude of the probabilistic loss and their decisions are tied systematically to changes in their expectations of other’s cooperation. On the other hand, subjects who are optimistic regarding total group cooperation are found to be more cooperative, but their decisions are not systematically tied to changes in expectations of others’ cooperation.

Suggested Citation

  • Esther Blanco & Tobias Haller & James M. Walker, 2017. "Externalities in appropriation: responses to probabilistic losses," Experimental Economics, Springer;Economic Science Association, vol. 20(4), pages 793-808, December.
  • Handle: RePEc:kap:expeco:v:20:y:2017:i:4:d:10.1007_s10683-017-9511-x
    DOI: 10.1007/s10683-017-9511-x
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    Cited by:

    1. Julien Jacob & Eve-Angéline Lambert & Mathieu Lefebvre & Sarah Driessche, 2023. "Information disclosure under liability: an experiment on public bads," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(1), pages 155-197, July.
    2. Stoddard, Brock, 2017. "Risk in payoff-equivalent appropriation and provision games," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 69(C), pages 78-82.
    3. Banerjee, Anwesha, 2024. "The effect of heterogeneity and risk on co-operation: Experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 109(C).
    4. David M. McEvoy & Tobias Haller & Esther Blanco, 2022. "The Role of Non-Binding Pledges in Social Dilemmas with Mitigation and Adaptation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(4), pages 685-710, April.
    5. Blanco, Esther & Dutcher, E. Glenn & Haller, Tobias, 2020. "Social dilemmas with public and private insurance against losses," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 924-937.

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    More about this item

    Keywords

    Social dilemma; Laboratory experiment; Endogenous externality; Strategic uncertainty; Ecosystem services;
    All these keywords.

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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