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Paretian dictators: constraining choice in a voluntary contribution game

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Abstract

We explore individuals’ preferences over limiting the choice sets of others in an environment with externalities. Specifically, we conduct public goods games in which participants can mandate the contributions of others or restrict choices to a subset of feasible contributions levels. We find that, relative to a baseline treatment in which individuals make choices from the set of all contribution alternatives, allowing individuals to constrain the choices of others results in more efficient outcomes. We discuss these results in light of the literature on behavioral theories of reciprocity and conditional cooperation and in regards to the literature on pre-constitutional design, political institutions, and social choice.

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Notes

  1. For example, while redistribution may be supported by theories of social preferences (e.g. Fehr and Fischbacher 2002), a large literature (e.g. Tullock 1959; Usher 1981) suggests that redistribution may lead to instability.

  2. Throughout the paper we refer to the outcome yielding joint wealth maximization as the Pareto efficient outcome. Such would be the case in environments with transfers.

  3. For discussions of behaviors in other types of public goods games, see Holt and Laury (2005).

  4. Other factors affecting contributions in linear public goods games include the marginal product of contributions, group size, and differences in wealth levels (Buckley and Croson 2006; Chan et al. 1996; Cherry et al. 2005; Isaac et al. 1994). Other research has suggested that contributions are driven by decision errors (e.g. Anderson et al., 1998; e.g. Goeree et al. 2002). Additionally, there is evidence that differences in the source of individuals’ endowments (and hence differences in individuals’ perceived property rights) affect allocation decisions (e.g. see Cherry et al. 2002; Hoffman and Spitzer 1985; Hoffman et al. 1994; Konow 2000; Oxoby and Spraggon 2008).

  5. Instructions available upon request.

  6. While some experiments find no difference in behavior resulting from the use of this elicitation procedure (e.g. Brandts and Charness 2000; Oxoby and McLeish 2004) other have found that the use of the strategy method affects behavior (e.g. Brosig et al. 2003). Note that our method is not strictly the strategy method (individuals are not making a schedule of decisions); rather each individual makes a decision and one individual’s decision is randomly chosen and implemented.

  7. Such high observed contributions are similar to pubic goods games with communication such as Cason and Khan (1999) and Isaac and Walker (1988) where communication between subjects results in higher contribution levels which (in the latter) are maintained and approach the efficient provision of the public good. In a related experimental design, Cason and Mui (1997) find that, consistent with Social Comparison Theory, teams of two dictators make offers which display a greater regard for others’ payoffs than single dictators. This suggests that communication, even in a sub-sample of the population, results in greater cooperative behavior.

  8. It is interesting to note that two groups in the QD treatment had implemented menus of {c A, c B, c C} = {5, 8, 10} and {c A, c B, c C} = {4, 7, 10}. In these two groups, average contributions were 5.00 (σ = 2.00) and 5.75 (σ = 1.5). This suggests that when the implemented menu left open the possibility for substantial free-riding (i.e. a value of c A significantly less than c C), participants interpreted this as a signal that the quasi-dictator (i.e. the individual who chose the implemented menu) would free-ride. This result is akin to the menu dependency discussed by Sen (1997) and identified in the experiments of Bolton et al. (2005) and Güth et al. (2001) in which “less fair” outcomes are rejected less when “more equal” allocations are unavailable. From a signalling perspective, this result is similar to the behaviors of decision makers in Van Huyck et al. (1993) in which auction bids served as signals of individuals’ intended strategies.

  9. Alternate measures of inequality (e.g. Atkinson’s index) yield similar results regarding the relative inequality across the treatments.

  10. Andreoni (1988) suggests that individuals may choose larger-than-Nash contributions strategically in repeated public goods environments.

  11. From the stance of equity theory (Walster et al. 1978), these outcomes are also efficient in that the inputs individuals have contributed are proportional to the outputs they receive. The behavior in our environment may also be reflective of the norms a decision maker thinks she and others should abide by, as suggested by the “Kantian norms” discussed in Bilodeau and Gravel (2004).

  12. In terms of limiting choices, Boudreaux and Lipford (1998) use a Buchanan-Tullock framework to argue for less inclusive voting rules in the European Union. The central idea here is that as group size and heterogeneity increases, less inclusive voting rules reduce costs. In our environment, “less inclusive” rules over contribution levels reduce the cost of uncertainty over others’ behavior, resulting in in more efficient outcomes. It should be noted that the work of Kocher et al. (2011) has demonstrated that risk preferences alone are not sufficient to explain contributions in public good games.

  13. A possible interpretation of this result is in broad terms as evidence that individuals prefer equality in treatment, as in before the law or by the government.

  14. Our experiment does not consider individuals’ willingness to give up some choices nor the value assigned to “freedom of choice” discussed by Hayek (1960) and Sen (1976).

  15. In a similar spirit, Sethi-Iyengar et al. (2004) find that participation in 401(k) plans is greater when there are fewer option choices.

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Acknowledgments

We thank Robin Boadway, John Boyce, Francisco Gonzalez, Erin Krupka, Michael McKee, Kendra McLeish and John Spraggon for suggestions. Financial support was provided by the Social Sciences and Humanities Research Council of Canada and the Canadian Institute for Advanced Research.

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  1. Department of Economics, University of Calgary, 2500 University Drive NW, Calgary, AB, T2N1N4, Canada

    Robert J. Oxoby

  2. Canadian Institute for Advanced Research, Toronto, ON, Canada

    Robert J. Oxoby

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Correspondence to Robert J. Oxoby.

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Oxoby, R.J. Paretian dictators: constraining choice in a voluntary contribution game. Const Polit Econ 24, 125–138 (2013). https://doi.org/10.1007/s10602-013-9139-6

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