This paper considers incentives to provide goods that are non-excludable along social or geographic links. We find, first, that networks can lead to specialization in public good provision. In every social network there is an equilibrium where some individuals contribute and others free ride. In many networks, this extreme is the only outcome. Second, specialization can benefit society as a whole. This outcome arises when contributors are linked, collectively, to many agents. Finally, a new link increases access to public goods, but reduces individual incentives to contribute. Hence, overall welfare can be higher when there are holes in a network.
Milton Friedman famously suggested that firms ought not divert profits toward public goods because shareholders can better make these contributions themselves. Despite this, activist shareholders are increasingly successful in persuading firms to be “socially responsible.” We study firm behavior when shareholders care about public goods as well as profits and when managerial contracts reflect these concerns. Under these ideal conditions, managers redirect more profits toward public goods than shareholders would when acting separately—shareholders are poorer but happier. Further, so long as the public good is sufficiently desirable, the manager selects the socially optimal level of output, despite the mismatch between shareholder preferences and those of society at large. This paper was accepted by Joshua Gans, business strategy.
Potential Pareto Public Goods create an aggregate benefit to society while harming some members of the community. As the overall benefit outweighs the harm incurred, provision may lead to Pareto improvement if the gains from cooperation are used to compensate the harmed parties. Such situations are ubiquitous, e.g., in not-in-my-backyard (NIMBY) problems. We study experimentally voluntary contributions to Potential Pareto Public Goods, in which provision is efficient but harms a minority in the group. We test the effects of punishment and reward institutions, with and without communication. We find that contributions to Potential Pareto Public Goods are not viewed as unequivocally socially desirable and do not increase with communication or punishment. With the reward institution, communication facilitates compensation, undoing the harm imposed on the minority player by majority contributions. Consequently, contributions are no longer viewed as socially undesirable, and majority contributions increase. Taken together, our results establish that perceptions and behavior in voluntary contributions to Potential Pareto Public Goods are dramatically different than with universal public goods that benefit all members of the community. We suggest that the underlying mechanism is team reasoning: individuals consider what is good for the group, and play their part in achieving that goal.
Sanctioning institutions are of utmost importance for overcoming free-riding tendencies and enforcing outcomes that maximize group welfare in social dilemma situations. We investigate, theoretically and experimentally, the endogenous formation of institutions in public goods provision. Our theoretical analysis shows that players may form sanctioning institutions in equilibrium, including those governing only a subset of players. The experiment confirms that institutions are formed and that it positively affects cooperation and group welfare. However, the data also shows that success is not guaranteed. Players are unwilling to implement equilibrium institutions in which some players have the opportunity to free ride. Our results emphasize the role of fairness in the institution formation process.
Bacteria frequently live in densely populated surface-bound communities, termed biofilms [ ]. Biofilm-dwelling cells rely on secretion of extracellular substances to construct their communities and to capture nutrients from the environment [ ]. Some secreted factors behave as cooperative public goods: they can be exploited by nonproducing cells [ ]. The means by which public-good-producing bacteria avert exploitation in biofilm environments are largely unknown. Using experiments with , which secretes extracellular enzymes to digest its primary food source, the solid polymer chitin, we show that the public goods dilemma may be solved by two very different mechanisms: cells can produce thick biofilms that confine the goods to producers, or fluid flow can remove soluble products of chitin digestion, denying access to nonproducers. Both processes are unified by limiting the distance over which enzyme-secreting cells provide benefits to neighbors, resulting in preferential benefit to nearby clonemates and allowing kin selection to favor public good production. Our results demonstrate new mechanisms by which the physical conditions of natural habitats can interact with bacterial physiology to promote the evolution of cooperation. Bacteria secrete extracellular enzymes that are essential for consuming solid nutrients. Released soluble products are public goods that can be exploited by non-enzyme-producing cheaters. Drescher et al. show that this public goods dilemma can be solved via formation of thick biofilms that capture products or by flow that removes products.
Leaving the joint enterprise when defection is unveiled is always a viable option to avoid being exploited. Although loner strategy helps the population not to be trapped into the tragedy of the commons state, it could offer only a modest income for nonparticipants. In this paper we demonstrate that showing some tolerance toward defectors could not only save cooperation in harsh environments but in fact results in a surprisingly high average payoff for group members in public goods games. Phase diagrams and the underlying spatial patterns reveal the high complexity of evolving states where cyclic dominant strategies or two-strategy alliances can characterize the final state of evolution. We identify microscopic mechanisms which are responsible for the superiority of global solutions containing tolerant players. This phenomenon is robust and can be observed both in well-mixed and in structured populations highlighting the importance of tolerance in our everyday life.
Microbial growth can be characterized by a limited set of macroscopic parameters such as growth rate, biomass yield and substrate affinity. Different culturing protocols for laboratory evolution have been developed to select mutant strains that have one specific macroscopic growth parameter improved. Some of those mutant strains display tradeoffs between growth parameters and changed metabolic strategies, for example, a shift from respiration to fermentation. Here we discuss recent studies suggesting that metabolic strategies and growth parameter tradeoffs originate from a common set of physicochemical and cellular constraints, associated with the allocation of intracellular resources over biosynthetic processes, mostly protein synthesis. This knowledge will give insight in ecological and biological concepts and can be used for metabolic and evolutionary engineering strategies.
A large and growing literature links high levels of ethnic deversity to low levels of public goods provision. Yet although the empirical connection between ethnic heterogeneity and the underprovision of public goods is widely accepted, there is little consensus on the specific mechanisms through which this relationship operates. We identify three families of mechanisms that link diversity to public goods provision—what we term "preferences," "technology," and "strategy selection" mechanisms—and run a series of experimental games that permit us to compare the explanatory power of distinct mechanisms within each of these three families. Results from games conducted with a random sample of 300 subjects from a slum neighborhood of Kampala, Uganda, suggest that successful public goods provision in homogenous ethnic communities can be attributed to a strategy selection mechanism: in similar settings, co-ethnics play cooperative equilibria, whereas non-co-ethnics do not. In addition, we find evidence for a technology mechanism: co-ethnics are more closely linked on social networks and thus plausibly better able to support cooperation through the threat of social sanction. We find no evidence for prominent preference mechanisms that emphasize the commonality of tastes within ethnic groups or a greater degree of altruism toward co-ethnics, and only weak evidence for technology mechanisms that focus on the impact of shared ethnicity on the productivity of teams.
A longstanding idea in the literature on human cooperation is that cooperation should be reinforced when conditional cooperators are more likely to interact. In the context of social networks, this idea implies that cooperation should fare better in highly clustered networks such as cliques than in networks with low clustering such as random networks. To test this hypothesis, we conducted a series of web-based experiments, in which 24 individuals played a local public goods game arranged on one of five network topologies that varied between disconnected cliques and a random regular graph. In contrast with previous theoretical work, we found that network topology had no significant effect on average contributions. This result implies either that individuals are not conditional cooperators, or else that cooperation does not benefit from positive reinforcement between connected neighbors. We then tested both of these possibilities in two subsequent series of experiments in which artificial seed players were introduced, making either full or zero contributions. First, we found that although players did generally behave like conditional cooperators, they were as likely to decrease their contributions in response to low contributing neighbors as they were to increase their contributions in response to high contributing neighbors. Second, we found that positive effects of cooperation were contagious only to direct neighbors in the network. In total we report on 113 human subjects experiments, highlighting the speed, flexibility, and cost-effectiveness of web-based experiments over those conducted in physical labs.
The promise of punishment and reward in promoting public cooperation is debatable. While punishment is traditionally considered more successful than reward, the fact that the cost of punishment frequently fails to offset gains from enhanced cooperation has lead some to reconsider reward as the main catalyst behind collaborative efforts. Here we elaborate on the "stick vs. carrot" dilemma by studying the evolution of cooperation in the spatial public goods game, where besides the traditional cooperators and defectors, rewarding cooperators supplement the array of possible strategies. The latter are willing to reward cooperative actions at a personal cost, thus effectively downgrading pure cooperators to second-order free-riders due to their unwillingness to bear these additional costs. Consequently, we find that defection remains viable, especially if the rewarding is costly. Rewards, however, can promote cooperation, especially if the synergetic effects of cooperation are low. Surprisingly, moderate rewards may promote cooperation better than high rewards, which is due to the spontaneous emergence of cyclic dominance between the three strategies. Copyright (C) EPLA, 2010