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Environmental investment decisions: experimental evidence of team versus individual decision making

Author

Listed:
  • Felgendreher, Simon

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Hennlock, Magnus

    (olicy and Economy, IVL Swedish Environmental Research Institute)

  • Löfgren, Åsa

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Wollbrant, Conny

    (Department of Economics, University of Stirling)

Abstract

We study experimentally how investment decisions are affected by equally stringent but different policy regime treatments and how differences depend on whether decisions are made individually or in groups. In our experiment, subjects decide on an investment level either individually or jointly in groups of three. In addition, decisions are made subject to either a tax or performance standard treatment. We find that investments are significantly higher and closer to the level that maximizes revenues of the hypothetical firm in the performance standard treatment. This holds for both individual and group decisions, but we find no evidence of an interaction effect. Even though groups seem to have a knowledge advantage, they are not able to benefit from it, since intragroup communication is not able to transmit the microeconomic reasoning to group members without such knowledge. Also, groups are not able to attenuate the attention bias of focusing on selective information depending on the specific policy treatment.

Suggested Citation

  • Felgendreher, Simon & Hennlock, Magnus & Löfgren, Åsa & Wollbrant, Conny, 2018. "Environmental investment decisions: experimental evidence of team versus individual decision making," Working Papers in Economics 719, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0719
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    File URL: http://hdl.handle.net/2077/55032
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    More about this item

    Keywords

    group behavior; investment inefficiencies; policy instruments;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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