James Walker

Explores ways that the tragedy of the commons can be avoided by people who use common-property resources

Contemporary political theory often assumes that individuals cannot make credible commitments where substantial temptations exist to break them unless such commitments are enforced by an external agent. One such situation may occur in relation to common pool resources, which are natural or man-made resources whose yield is subtractable and whose exclusion is nontrivial (but not necessarily impossible). Examples include fisheries, forests, grazing ranges, irrigation systems, and groundwater basins. Empirical evidence, however, suggests that appropriators in common pool resources develop credible commitments in many cases without relying on external authorities. We present findings from a series of experiments exploring (1) covenants alone (both one-shot and repeated communication opportunities); (2) swords alone (repeated opportunities to sanction each other); and (3) covenants combined with …

This paper examines the relationship between variations in group size and “free-riding” behavior in the voluntary provision of public goods. We examine experimentally two pertinent concepts: the marginal return to an individual from contributions to the public good, and the actual number of members in the group. Our results strongly support a hypothesis that increasing group size leads to a reduction in allocative efficiency when accompanied by a decrease in marginal return from the public good (as from crowding or an association of large groups with imperceptibility of marginal benefits). Our results do not support a pure numbers-in-the-group effect.

Trust is essential to economic and social transactions of all kinds, from choosing a marriage partner, to taking a job, and even buying a used car. The benefits to be gained from such transactions originate in the willingness of individuals to take risks by placing trust in others to behave in cooperative and non-exploitative ways. But how do humans decide whether or not to trust someone? Using findings from evolutionary psychology, game theory, and laboratory experiments, Trust and Reciprocity examines the importance of reciprocal relationships in explaining the origins of trust and trustworthy behavior. In Part I, contributor Russell Hardin argues that before one can understand trust one must account for the conditions that make someone trustworthy. Elinor Ostrom discusses evidence that individuals achieve outcomes better than those predicted by models of game theory based on purely selfish motivations. In Part II, the book takes on the biological foundations of trust. Frans de Waal illustrates the deep evolutionary roots of trust and reciprocity with examples from the animal world, such as the way chimpanzees exchange social services like grooming and sharing. Other contributors look at the links between evolution, cognition, and behavior. Kevin McCabe examines how the human mind processes the complex commitments that reciprocal relationships require, summarizing brain imaging experiments that suggest the frontal lobe region is activated when humans try to cooperate with their fellow humans. Acknowledging the importance of game theory as a theoretical model for examining strategic relationships, in Part III the contributors tackle the …

New experimental evidence extending the investigation of free-riding behavior in public goods provision is presented. Procedures are developed to deal with the logistical problems inherent in experiments involving many subjects. Data from Voluntary Contribution Mechanism experiments are reported utilizing group sizes of 4, 10, 40 and 100. THese experiments provide replicable results that contradict the widely held view that a group's ability to provide the optimal level of a pure public good is inversely related to group size. On the contrary, groups of size 40 and 100 provided the public good more efficiently than groups of size 4 and 10. Several possible alternative explanations are discussed.

We examine experimentally the role of active communication as a mechanism for improving economic efficiency in a voluntary contribution public goods environment. With no communication this environment has been shown to induce significant subop‐timality, approaching zero contributions with iteration of the decision environment. Communication is shown to improve group optimality significantly. We examine the robustness of our results in increasingly complex environments and in environments in which there has been a history of communication but active communication is no longer available.

<h3 class="gsh_h3">Summary, conclusions and extensions</h3> The most important single observation from this research is the similarity between our wide range of results and the multitude of seemingly divergent conclusions about free riding from previous experimental results. Even when defined in the restrictive manner of this paper, free riding is neither absolutely all pervasive nor always nonexistent. This ‘intermediate’ result is not the same as a general theory which states that the predictable result of public goods provision processes is always weak free riding. The extremes of strong free riding and near-Lindahl optimal behavior can and do occur. These experiments further demonstrate that this diversity of outcome need not be attributed to inexplicable randomness. At least for the case of the voluntary contribution mechanism, there are identifiable factors which make free riding more or less likely to occur. Two such …

A survey of thirty‐one experimental studies which report data on the comparative effects of monetary rewards and opportunity cost shows: (1) several studies in which increased rewards shift the central tendency of the data toward the predictions of rational models; (2) in virtually all cases rewards reduce the variance of the data around the predicted outcome. This is consistent with a model in which rewards are balanced against decision cost in agent behavior and explicates the argument that when rational models fail it can be attributed to low opportunity cost of deviations from the rational prediction.

A growing number of field and experimental studies focus on the institutional arrangements by which individuals are able to solve collective action problems. Important in this research is the role of reciprocity and institutions that facilitate cooperation via opportunities for monitoring, sanctioning, and rewarding others. Sanctions represent a cost to both the participant imposing the sanction and the individual receiving the sanction. Rewards represent a zero‐sum transfer from participants giving to those receiving rewards. We contrast reward and sanction institutions in regard to their impact on cooperation and efficiency in the context of a public goods experiment. (JEL C92)

First-price auction theory is extended to the case of heterogeneous bidders characterized byM-parameter log-concave utility functions. This model, and its specific two-parameter constant relative risk averse special case, is generally supported by the results of 47 experiments. The one-parameter special case that comprises most of the theoretical literature is not supported by the experiments. One anomaly for the two-parameter model is that too many of the subjects exhibit positive (or negative) intercepts in their linear estimated bid functions. Accordingly, we develop a specific three-parameter model, which introduces a utility of winning, and a threshold utility of surplus. The new model, tested directly by introducing lump-sum payments or charges for winning, is not falsified by the new experiments.

This article presents a conceptual framework for theoretical and empirical analysis of the multiplicity of behavioral problems encountered in common-pool resources (CPRs). This framework is used to specify more clearly the strategic content of CPR dilemmas and to show their interaction. The framework shows how general theoretical constructs (e.g., Prisoner's Dilemma and coordination games) apply to these behavioral dilemmas. Finally, results from a case study and a set of laboratory experiments demonstrate the applicability of this framework in designing and conducting empirical research on CPRs.

Most cognitive approaches for explaining cooperation in Prisoner's Dilemma games include the view that many people believe that mutual cooperation is generally a gainful strategy to all parties and will cooperate when they think their partner cooperates. Proceeding along these lines, we argue that many participants treat a Prisoner's Dilemma game as an assurance game, and respond in a reciprocal manner to the choice or expected choice of their partner. We examine two bases for the expectation of a partner's cooperation in one-shot games: `general trust' and a `sense of control'. Further, we discuss why we expect general trust and a `sense of control'. Further, we discuss why we expect general trust and a sense of control to play different roles in societies, particularly in Japanese society and American society. Specifically, we test a general hypothesis that a sense of control plays a relatively more important role …

In the most general terms, a public good exhibits the characteristic of nonexcludability; its benefits are available both to those who help to provide it and those who do not. Two other important features of the public goods provision problem are (i) the mechanism or institution for providing the good and (ii) the incentive structure for potential providers. Among the most familiar institutions is the voluntary contributions mechanism (VCM) combined with an incentive structure such that, for a single period, low levels of contribution are a dominant strategy equilibrium, while some higher level of provision is Pareto-superior. There has been a considerable amount of experimental research on such an environment (see Isaac and Walker, 1987a, for a survey). The existence of such a dominant strategy equilibrium, however, is not the only potential source of problems for the VCM. In particular, under alternative environments a …

Communication has been shown to be an effective mechanism for promoting efficient resource use in homogeneous common-pool resource settings. Communication allows appropriators the opportunity to agree on an aggregate appropriation target and coordinate over the selection of input allocation rules. When appropriators are identical, these rules result in identical input allocations, which facilitates cooperation. We examine the robustness of communication as an efficiency-enhancing mechanism in settings where appropriators differ in input endowments. This heterogeneity creates a distributional conflict over access to common-pool resources. This conflict can cause self-governance to fail. We present findings from a series of experiments where heterogeneous endowments are assigned: (1) randomly, and appropriators have complete information, (2) through an auction, and appropriators have complete …

We analyse and empirically examine a multi‐level common‐pool resource (CPR) game consisting of a collective‐choice level game and an operational‐level game. In the collective‐choice game, participants anonymously propose allocation rules to be used in the operational game and vote anonymously on the proposed rules. Majority and unanimity rules are investigated. Our major finding is that both types of voting rules substantially increase efficiency relative to a baseline with no opportunity for collective choice, but the distributional consequences of the rules differ. To understand the process by which efficiency is improved better, we examine four predictive theories related to proposals, votes, and outcomes.