Evaluating the Cost of Enforcement by Agent-Based Simulation:A Wireless Mobile Grid Example

The subject of this paper is the cost of enforcement, to which we take a satisficing approach through the examination of marginal cost-benefit ratios. Social simulation is used to establish that less enforcement can be beneficial overall in economic terms, depending on the costs to system and/or stakeholders arising from enforcement. The results are demonstrated by means of a case study of wireless mobile grids (WMGs). In such systems the dominant strategy for economically rational users is to free-ride, i.e. to benefit from the system without contributing to it. We examine the use of enforcement agents that police the system and punish users that take but do not give. The agent-based simulation shows that a certain proportion of enforcement agents increases cooperation in WMG architectures. The novelty of the results lies in our empirical evidence for the diminishing marginal utility of enforcement agents: that is how much defection they can foreclose at what cost. We show that an increase in the number of enforcement agents does not always increase the overall benefits-cost ratio, but that with respect to satisficing, a minimum proportion of enforcement agents can be identified that yields the best results. © 2013 Springer-Verlag

Cooperation and Contagion in Web-Based, Networked Public Goods Experiments

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

If cooperation is likely punish mildly: Insights from economic experiments based on the snowdrift game

Punishment may deter antisocial behavior. Yet to punish is costly, and the costs often do not offset the gains that are due to elevated levels of cooperation. However, the effectiveness of punishment depends not only on how costly it is, but also on the circumstances defining the social dilemma. Using the snowdrift game as the basis, we have conducted a series of economic experiments to determine whether severe punishment is more effective than mild punishment. We have observed that severe punishment is not necessarily more effective, even if the cost of punishment is identical in both cases. The benefits of severe punishment become evident only under extremely adverse conditions, when to cooperate is highly improbable in the absence of sanctions. If cooperation is likely, mild punishment is not less effective and leads to higher average payoffs, and is thus the much preferred alternative. Presented results suggest that the positive effects of punishment stem not only from imposed fines, but may also have a psychological background. Small fines can do wonders in motivating us to chose cooperation over defection, but without the paralyzing effect that may be brought about by large fines. The later should be utilized only when absolutely necessary.Comment: 15 pages, 6 figures; accepted for publication in PLoS ON

The behavioural economics of climate change

This paper attempts to bring some central insights from behavioural economics into the economics of climate change. In particular, it discusses (i) implications of prospect theory, the equity premium puzzle and time inconsistent preferences in the choice of discount rate used in climate change cost assessments, and (ii) the implications of various kinds of social preferences for the outcome of climate negotiations. Several reasons are presented for why it appears advisable to choose a substantially lower social discount rate than the average return on investments. It also seems likely that taking social preferences into account increases the possibilities of obtaining international agreements, compared to the standard model. However, there are also effects going in the opposite direction, and the importance of sanctions is emphasised