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Analysing group contract design using a threshold public goods experiment

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  • Jetske A Bouma
  • T T Binh Nguyen
  • Eline van der Heijden
  • Justin J Dijk

Abstract

This paper presents the results of a threshold public goods game experiment with heterogeneous players. The experiment is designed in close collaboration with the Dutch association of agri-environmental farmer collectives. Subjects are recruited at a university (study 1) and a farm management training centre (study 2), the subjects of the second study most resembling the subjects in the field. The experiment consists of several treatments and each treatment has two different distribution rules, which are varied in a within-subjects manner. After subjects have experienced both, they can vote for one of the two rules: either a differentiated bonus that results in equal payoff for all, or an undifferentiated, equal share of the group bonus. In a between-subjects manner, subjects can vote for a (minimum or average) threshold or are faced with an exogenous threshold. The results indicate that exogenous thresholds perform better, possibly because the focal point they provide facilitates coordination. With regard to the two distribution rules, the results are mixed: in study 1, average contributions and payoffs are higher under the 'equal-payoff' rule, but there is no significant difference between the two in study 2. Overall, our results suggest that environmental payment schemes should consider cost heterogeneity in the design of group contracts, and pay explicit attention to coordination problems too.

Suggested Citation

  • Jetske A Bouma & T T Binh Nguyen & Eline van der Heijden & Justin J Dijk, 2020. "Analysing group contract design using a threshold public goods experiment," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 47(3), pages 1250-1275.
    • Handle: RePEc:oup:erevae:v:47:y:2020:i:3:p:1250-1275.
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    File URL: http://hdl.handle.net/10.1093/erae/jbz045
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    Cited by:

    1. Francois Bareille & Matteo Zavalloni & Meri Raggi & Davide Viaggi, 2021. "Cooperative Management of Ecosystem Services: Coalition Formation, Landscape Structure and Policies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 323-356, June.
    2. Villamayor-Tomas, Sergio & Sagebiel, Julian & Rommel, Jens & Olschewski, Roland, 2021. "Types of collective action problems and farmers’ willingness to accept agri-environmental schemes in Switzerland," Ecosystem Services, Elsevier, vol. 50(C).
    3. Diya Elizabeth Abraham & Luca Corazzini & Miloš Fišar & Tommaso Reggiani, 2021. "Delegation and Overhead Aversion with Multiple Threshold Public Goods," MUNI ECON Working Papers 2021-14, Masaryk University, revised Feb 2023.
    4. Abraham, Diya & Corazzini, Luca & Fišar, Miloš & Reggiani, Tommaso, 2023. "Coordinating donations via an intermediary: The destructive effect of a sunk overhead cost," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 287-304.

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