Focal Points, Gender Norms and Reciprocation in Public Good Games

We examine the impact of information regarding other people’s choices on individual choice in a public good experiment with two separate treatments. In the implicit treatment, subjects do not see the average contribution of others in their group, but they can calculate it from the information available. In the explicit treatment, subjects see the average contribution of others in their group. If subjects are rational calculating agents as suggested in mainstream economic theory there should be no difference in observed behavior across treatments: agents should use all available information to make decisions. What we see instead is quite different and consistent with the presence of social norms: first, players change their behavior in response to the change in displayed information; second, changes in individual behavior produce identical group outcomes, in terms of total payoffs or efficiency across the two treatments. How does this happen? The display of the average contribution of others results in behavior consistent with a focal point (Schelling, 1960), i.e., more subjects behave as reciprocators (conditioning their contributions on the contributions of others), and fewer behave as cooperators or free-riders (unconditionally contributing a lot or a little, respectively). This change in behavior differs by gender: women behave similarly to men when they see the average contribution by others; when they cannot, they behave differently, favoring unconditional strategies of free-riding or cooperation. Men’s behavior, in contrast to women’s adaption, does not adjust to social cues, as suggested by Croson and Gneezy (2009).public goods, focal points, social norms, gender, experiments

Is Inverse Demand Perverse?

Our non-representative sample of 245 undergraduates had significantly lower scores on questions presented in the standard heterogeneous form (i.e., Direct Demand equation and Inverse Demand graph) than on questions presented in non-standard homogenous forms. This result, which holds for advanced students, highlights one reason why 95 percent of students in economics principles classes do not enter the major---economics can be gratuitously mathematical. We argue that the Inverse Demand standard hurts rather than helps economics when it is used in early courses, but that professors have no incentive to change their methods. We recommend that early classes use either no graphs or a homogenous combination of graph and equation. The standard should be introduced later, when benefits outweigh costs.Demand and Price Analysis,

Water Agencies\u27 Distribution and Inefficiency Under Different Decision Rules

Water management organizations often distribute water among members according to a political decision function (e.g., voting, historical delivery, etc.) -- not economic functions of willingness to pay or shadow values. As a result, scarce water supplies are lost to some members and found by others, leading to, respectively, over-conservation or over-use of water by the members. We find analytical equilibria with a two-player, game-theoretic model of optimal water distribution under economic (base case) and different political allocation rules (historic allocation, land-values, population, agricultural intensity) to measure the theoretical distortion of each allocation compared to the base case. We then simulate model with n-players to examine the effects of heterogeneous types and interactive influences with different parameter values. We compare these results to the actual allocation of water between the 26 members of the Metropolitan Water District of Southern California to estimate the distribution of costs and benefits to MWD members under MWD\u27s political allocation mechanism

The struggle for residential water metering in England and Wales

The transformation of water services that began with the privatisation of water companies in 1989 extended to households with the implementation of water metering. Meters 'privatised' water and the cost of provision by allocating to individual households costs that had previously been shared within the community. This (ongoing) conversion of common pool to private good has mostly improved economic, environmental and social impacts, but the potential burden of metering on poorer households has slowed the transition. Stronger anti-poverty programmes would be better at addressing this poverty barrier than existing coping mechanisms reliant on subsidies from other water consumers.Global Challenges (FGGA

Desalination and the commons: tragedy or triumph?

A policy is more likely to be economically efficient when its costs and benefits fall on the same group, but politicians can allocate costs and benefits to different groups within their jurisdictional commons. This article examines the distribution of costs and benefits from desalination projects using examples from San Diego, Almeria and Riyadh. The examples illustrate how mismatches between costs and benefits can persist or change as politicians adjust the policy portfolio to balance inefficiency and political risk.Global Challenges (FGGA

Semi-Public Competitions *

Abstract The process of innovation is driven by two main factors: new inventions and institutions supporting the transformation of inventions into marketable innovations. This paper proposes a new institution, called a semi-public competition, that has been neglected by the economic literature but exists frequently in practice. I show how semi-public competitions can mitigate a dilemma that arises at an early stage of innovative activity and specify the conditions under which a semi-public competition can increase welfare. The results suggest that governments promote knowledge about the semi-public competition mechanism but refrain from direct public funding of competitions

The End of Abundance: How Water Bureaucrats Created and Destroyed the Southern California Oasis

This paper describes how water bureaucrats shaped Southern California’s urban development and put the region on a path of unsustainable growth. This path was popular and successful until the supply shocks of the 1960s, 1970s and 1980s made shortage increasingly likely. The drought of 1987-1991 revealed that the norms and institutions of abundance were ineffective in scarcity. Ever since then, Southern California has teetered on the edge of shortage and economic and social disruption. Despite the risks of business as usual, water bureaucrats, politicians and developers continue to defend a status quo management strategy that serves their interests but not those of citizens. Professional norms, control of the discourse, and insulation from outside pressure slow or inhibit the adoption of management techniques suitable to scarcity. Pressure from increasing population and politically and environmentally destabilised supplies promise to make rupture more likely and more costly