A Dynamic Analysis of the Evolution of Conventions in a Public Goods Experiment with Intergenerational Advice

Abstract

In this paper we analyse contributions to a public good within an inter-generational framework where at the end of each session one generation of subjects leave advice for the succeeding generation via free form messages. Such advice can be private (advice left by one player in generation t is given only to her immediate successor in generation t+1) or public (advice left by players of generation t is made available to all members of generation t+1). We adopt a novel approach to analysing the data by estimating a panel regression model that enables us to understand the dynamics of the process better and to highlight the learning that occurs over time. Our estimation results show that contributions in any period depend crucially on (1) contributions in the previous period and (2) on the group average in the previous period - more specifically whether a subject’s own contribution in the previous period fell above or below the group average. We find that in the public advice treatment when a subject’s contribution fell below the group average in the previous period there is a tendency on the part of that subject to increase contributions in the next period. This is evidence that the public advice treatment leads to the creation of virtuous norms that help sustain high cooperation and mitigate problems of free riding over time.Voluntary contributions mechanism, Public goods, Experiments, Panel Data, Generations