Cooperation in small groups: the effect of group size

We study the effect of group size on cooperation in voluntary contribution mechanism games. As in previous experiments, we study four- and eight-person groups in high and low marginal per capita return (MPCR) conditions. We find a positive effect of group size in the low MPCR condition, as in previous experiments. However, in the high MPCR condition we observe a negative group size effect. We extend the design to investigate two- and threeperson groups in the high MPCR condition, and find that cooperation is highest of all in twoperson groups. The findings in the high MPCR condition are consistent with those from n-person prisoner's dilemma and oligopoly experiments that suggest it is more difficult to sustain cooperation in larger groups. The findings from the low MPCR condition suggest that this effect can be overridden. In particular, when cooperation is low other factors, such as considerations of the social benefits of contributing (which increase with group size), may dominate any negative group size effect

Inconsistent Behavior in Lottery Choice Experiments

College students made choices in binary lottery situations involving small amounts of money-payoffs ranged from $2.50 to -$1.00. Each of 52 subjects made 150 choices. Any of a number of choice models might be used to describe the outcome of such an experiment. However, no simple model (based on expected utility maximization) is capable of explaining all choices (of a particular subject)-there are always some inconsistent choices. The experiment was designed to isolate factors affecting inconsistency. Such research is aimed at improving the predictive ability of choice models by reducing the stochastic error. A choice model based on expected utility maximization was developed. The model was designed to maximize the internal consistency of each subject's choices. In all cases, some choices were found to be inconsistent with the model. Grouping the data in various ways, four factors hypothesized to affect inconsistency were tested: difference in dispersion of the payoffs, signs of the payoffs, order of the choice situation, and small changes in wealth. Applying classical statistical techniques, inconsistency was found to be related to the first three of these factors. Some implications of these results for expected utility models of choice are presented.</p

Risk orientation as a predictor in the Prisoner's Dilemma

The Prisoner's Dilemma is a mixed-motive situation in which noncooperative shortrun maximizing behavior is inconsistent with long-run (cooperative) maximization. It has been investigated experimentally under various conditions, and the literature is summarized in Lave (1965), Rapoport and Onvant (1962), and Gallo and McClintock ( 1965). One version of the situation is illustrated in Matrix I of Table 1. The payoffs to player A, identified by the strategies of A and B respectively, can be ranked from the most to the least preferred: (2,1), (1,1), (2,2), and (1,2). This ranking shows the structure of the game: no matter which strategy the other player chooses, a subject prefers the payoffs resulting from strategy 2. In a one-trial game, (2,2) begins to take on the character of a unique solution.</p

Collusion in Oligopoly: An Experiment on the Effect of Numbers and Information

Despite considerable scholarly effort, no theory has provided reliable predictions of price or output in oligopoly markets. Techniques have not been found which can unravel the complex interdependencies between firms. As long as the consequence of each firm's actions depend in large measure on the unknown reactions of other firms, rational behavior (for the firm) will be difficult to define.</p