Maintaining Private and Public Facilities: Theory and Experiment

This paper studies two types of facility maintenance games in the laboratory, in a cross-cultural experiment conducted in Tokyo and Guam. One is called the one-person maintenance game, in which only one player makes maintenance investment decisions for a privately owned facility, and the other is called the two-person maintenance game, in which two players make maintenance investment decisions for a shared public facility without communication. Both games are characterized by the fact that the durability of the facility depends on each player's decision of costly investment in its maintenance, and that the facility can be enjoyed as long as it is available, i.e., the probability that the game will end or continue depends on each player's decision of costly investment in its maintenance. Our main results are that first, most subjects chose to invest in each experimental round of both games. At the beginning of the two games, the percentage of subjects who are willing to invest is significantly higher among the Tokyo subjects than among the Guam subjects. However, as the game proceeds, the difference in this percentage between the two groups becomes statistically insignificant. Second, in either the one-person game, the two-person game or both, subjective factors (i.e., risk and time preferences) and/or objective factors (i.e., the durability of the facility) play important roles in influencing the investment behaviors of either the Guam subjects, the Tokyo subjects or both. Third, there is a significant difference in the investment ratio between the one-person and two-person games among the Tokyo subjects, but not among the Guam subjects. Finally, we also investigate the factors affecting different behaviors between the two games. The results indicate the possibility of conditional cooperative behavior among the Guam subjects and the possibility of free rider behavior among the Tokyo subjects in the two-person game.