Institutional choice in social dilemmas: An experimental approach

This paper presents an experimental study on the ability of human groups to escape the tragedy of the commons through institutional change. It shows that the groups identify institutional change as a means of resolving social dilemmas and are ready to apply it even if the change requires an unanimous vote. At the same time, the groups who were given the right to change the rules performed poorer on average than the control-groups. This result stands in contradiction to elementary economic reasoning as well as the results of previous experimental studies. --social dilemmas,common pool resource,laboratory experiment,group behavior,institutional choice

Endowment effect theory and the Samuelson solution – a thought experiment

Thaler (1980) employs prospect theory to explain the endowment effect, i.e. the empirically observed disparity between the willingness to pay for a certain good (WTP) and the willingness to accept retribution payments in exchange for giving up this good (WTA). This disparity is caused either by the disutility from parting with one?s endowment and/or by an extra utility from ownership which is not anticipated by individuals who are not endowed with the good. These effects may not apply to public goods because consumers are not given exclusive property rights. The graphical tools introduced by Samuelson (1954) are applied to show how these effects influence the allocation of resources among private and public goods. An inefficient allocation only occurs if the ownership utility effect applies to one good but not to the other. --endowment effect,loss aversion,public goods,efficiency,Samuelson solution

Determinants of the influence of voters and interest groups on the political decision making process

This paper provides a comprehensive theoretical model of the political decision making process. Therein two ideologically different political parties compete for power. Their primary instrument in this competition are programmatic concessions in favor of voters and interest groups. As any concession causes losses in utility for the party members, the parties try to win the election with as little concessions as possible. The efficient amount of concessions and their distribution on different groups of voters and interest groups is derived. These concessions are taken as an indicator for the influence of these two groups of political agents on the political decision making process. Hence the political model developed in this paper helps to determine the political influence of voters and interest groups. The illustrations show that the efficient amount of concessions depends on the closeness of the election race. The closer the initial distribution of votes, the more concessions can voters and interest groups wring from the political parties. The characteristics of the political landscape, e.g. the share of informed voters and the degree of ideological polarization, are found to determine the efficient amount of concessions and thus the influence of voters and interest groups on the political decision making process. --Public Choice,theory,voters,interest groups,election

Efficiency-enhancing effects of private and collective enterprises in transitional China

Private and collective enterprises are expected to increase overall efficiency in transitional China, partly because they are more efficient than state owned enterprises. More importantly, this paper argues, they induce efficiency gains in state owned enterprises and the economy as a whole. Empirical evidence from 28 Chinese provinces between 1993 and 1998 gives support to this hypothesis by showing that the activity levels of private enterprises and rural collective enterprises have a positive effect on regional labor productivity. --China,private enterprises,collective enterprises,efficiency,labor productivity

Endowment effect theory, prediction bias and publicly provided goods – an experimental study

Many studies report on a systematic disparity between the willingness to pay for a certain good (WTP) and the willingness to accept retribution payments in exchange for giving up this good (WTA). Thaler (1980) employs prospect theory to explain this disparity. The literature contains two different interpretations of his endowment effect theory. Accordingly, the disparity is caused either by the disutility from parting with one's endowment and/or by an extra utility from ownership which is not anticipated by individuals who are not endowed with the good. So far, the empirical evidence on the applicability of endowment effect theory is limited to private goods. The current paper reports on an experiment which finds a significant ownership utility effect for a publicly provided good. This result indicates that prospect theory applies to publicly provided goods even though consumers do not have exclusive property rights. --endowment effect,loss aversion,publicly provided goods,experiment

Electoral competition in a multidimensional political arena - parallel moves instead of convergence in policy platforms

This paper provides a theoretical model of electoral competition in a multidimensional political arena with a heterogenous electorate and politically active interest groups. The emerging pattern of movement in policy platforms is fundamentally different to the concept of convergence proposed by the spatial theory of voting. Rather than the centre of the scale of policy preference, its extreme ends, occupied by dominant-issue-voters and interest groups, attract the policy platforms. The platforms move in parallel instead of towards each other, while the difference in policy platforms is reduced only under certain conditions. --voters,interest groups,ideology,political parties,convergence

Party competition in a heterogeneous electorate – the role of dominant-issue-voters

This paper provides a theoretical model of party competition in a heterogeneous electorate. The latter consists of numerous groups of dominant-issue-voters who base their voting decision primarily on one issue of the political agenda. Parties follow a lexicographic objective function, aiming to gain power at minimum programmatic concessions. The emerging pattern of movement in policy platforms is fundamentally different to the concept of convergence proposed by the spatial theory of voting. Rather than the centre of the scale of policy preference, its extreme ends, occupied by dominant-issue-voters, attract the policy platforms. The difference in policy platforms is not reduced. The conclusions are found to be compatible with some major empirical findings of the Manifesto Research Group. --voters,incomplete information,political parties,convergence

Institutional choice vs communication in social dilemmas – an experimental approach

This paper presents an experimental study that compares the ability of human groups to escape the tragedy of the commons through institutional change or communication. Teams of five players are placed in a dynamic CPR environment with inefficient institutional settings. The results clearly show the vital importance of communication. At the same time, the groups who were allowed to replace the inefficient institutional settings by other more appropriate rules performed worse than those groups who were not given this opportunity. --social dilemmas,laboratory experiment,group behavior,institutional choice,communication