Arthur Schram

Value Orientations, Expectations and Voluntary Contributions in Public Goods

An experimental analysis of voluntary, binary contributions for step-level public goods is presented. Independent information is obtained on individual value orientation and expectations about the behavior of other subjects using incentive compatible mechanisms. The effects of increasing payoffs for the public good and of decreasing groupsize are investigated. Attention is focused on the determination of expectations, the use of expectations when deciding on behavior, and differences in expectations and behavior between individuals with different value orientations. Copyright 1996 by Royal Economic Society.

Public good provision and public bad prevention: The effect of framing.

Abstract An experimental analysis of voluntary, binary contributions for step-level public goods/bads is presented. Alternatively, the situation is presented as the provision of a public good or the prevention of a public bad. From a strategic point of view these presentations are equivalent. In early periods of the 20 round experiments, behavior is indeed observed to be similar in both cases, but after about 5 periods differences start to occur, that grow larger. A simple learning model is developed that replicates the patterns in the experiments. Extrapolation beyond 20 periods show that the pattern observed reflects an equilibrium selection.

Artificiality: The tension between internal and external validity in economic experiments

The artificiality of a laboratory situation is placed in the context of the tension between external and internal validity. Most economists consider internal validity to be most important. A proper evaluation of the ‘artificiality criticism’ (a lack of external validity) requires distinguishing the various goals experimentalists pursue. External validity is relatively more important for experiments searching for empirical regularities than for theory‐testing experiments. As experimental results are being used more often in the development of new theories, a methodological discussion of their external validity is becoming more important.

Strategic behavior in public good games: when partners drift apart

Abstract In a public good experiment one group member is replaced by another after a prespecified number of periods. Evidence of both strategic (forward looking) and adaptive (backward looking) behavior is observed.

Why people vote: experimental evidence

Abstract This paper reports the results of a series of experiments in which the voter turnout decision was analyzed as a participation game. The experiments were inspired by the model of Schram and Van Winden (1991). In the model, individuals favoring the same policy or candidate are members of a common reference group, and the vote decision is determined by inter- and intragroup relations. Our experimental data supported three hypotheses derived from this model. First, participation increased with group identity. Second, communication enhanced participation. Finally, participation was strongly related to individual characteristics. A simple analysis of the way people learn from their experiences in previous periods is used to argue that any model of voter turnout should take account of myopic adaptive behavior and inertia.

Indirect Punishment and Generosity Toward Strangers

Cheaper Cooperation In the context of public goods games in which optimal benefit is achieved when all participants contribute, bad behavior cannot always be deterred by direct punishment, and has the added disadvantage that the punisher may suffer a cost. Alternatively, instead of punishment, rewarding those who contribute can be effective in encouraging and maintaining widespread cooperation, with the added plus that group benefits are not diminished by the costs of punishment. But Ule et al. (p. 1701) discovered experimentally that if someone is treated depending on how they have behaved in previous interactions, retaining the option to occasionally apply punishment shifts the payouts to favor cooperators more than defectors. Frequent rewards spiced with occasional punishment are a recipe for the evolution of cooperation. Many people incur costs to reward strangers who have been kind to others. Theoretical and experimental evidence suggests that such “indirect rewarding” sustains cooperation between unrelated humans. Its emergence is surprising, because rewarders incur costs but receive no immediate benefits. It can prevail in the long run only if rewarders earn higher payoffs than “defectors” who ignore strangers’ kindness. We provide experimental evidence regarding the payoffs received by individuals who employ these and other strategies, such as “indirect punishment,” by imposing costs on unkind strangers. We find that if unkind strangers cannot be punished, defection earns most. If they can be punished, however, then indirect rewarding earns most. Indirect punishment plays this important role, even if it gives a low payoff and is rarely implemented.

Voter turnout as a participation game: an experimental investigation

This paper reports the results of a series of experiments in which participation games are analyzed. Voter turnout is an example of an application of this game. Hypotheses derived from a game theoretic analysis are systematically elaborated, analyzed, and tested. The results are used to explore future paths of research. A distinction is made in two parameter configurations (representing winner-takes-all elections and elections with proportional representation).

Competition with forward contracts: a laboratory analysis motivated by electricity market design

We use experiments to study the efficiency effects for a market as a whole of adding the possibility of forward contracting to a pre-existing spot market. We deal separately with the cases where spot market competition is in quantities and where it is in supply functions. In both cases we compare the effect of adding a contract market with the introduction of an additional competitor, changing the market structure from a triopoly to a quadropoly. We find that, as theory suggests, for both types of competition the introduction of a forward market significantly lowers prices. The combination of supply function competition with a forward market leads to high efficiency levels.

Why people vote: Free riding and the production and consumption of social pressure

Abstract A model is presented which places the decision to vote or abstain in a rational choice framework. It is shown that casting a vote may well be a rational act, following from an individual cost-benefit analysis. It is argued that (reference-)group interests play an important role when an individual determines actions in the political sphere. Through its (relative) turnout, a group can affect future tax rates to which its members are liable, and an optimal turnout level is derived for each group. Using this optimal level, within-group processes are analyzed, where certain group members (‘producers of social pressure’) try to convince others to go and vote. For these producers, voting is shown to be a rational act. Other members may give in to this pressure and be induced to cast a vote. These members may be thought to vote out of a sense of ‘civic duty’. Equilibria for the model, characterized by positive turnout, are derived, an example is presented, and the results are discussed.

Sorting Out the Seeking: The Economics of Individual Motivations

Various models of individual motivations are confronted with evidence from different kinds of laboratory experiments. The motivations distinguished are categorized as selfish, other regarding, or cooperative. The experimental evidence shows that the traditional, selfish model is too limited, but that the alternative models that have been suggested each have shortcomings of their own.