Experiments on the Fragility of Cooperation and Mechanisms to Overcome this Problem

In experimental economics cooperation is frequently modeled

by a so-called public-good design. This design tries to depict the

problem that cooperation is benefi cial for every participant but

that there are individual incentives to free-ride, i.e., to invest no

personal effort to increase the common welfare. In public-good

experiments cooperation usually breaks down due to imperfect

conditional cooperation if measures like sanction possibilities,

reputation-building or communication are absent.

We contribute to the literature in a number of ways. For example

we introduce a new dynamic public-good design to analyze

whether subjects behave differently when they do not receive

new resources in a multiperiod public-good design. We further

provide a monitoring mechanism that mitigates the free-riding

problem, in the fi rst study with a linear and in a second study

with a non-linear production function. However, the costly

implementation of the monitoring in itself represents either a

(second-level) step-level public-good or a second-level linear

public-good in the latter case. Finally we introduce a limit on

punishment.