The choice of institutions to solve cooperation problems: a survey of experimental research
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The choice of institutions to solve cooperation problems: a survey of experimental research Astrid Dannenberg1,2 · Carlo Gallier3 Received: 7 August 2018 / Revised: 13 September 2019 / Accepted: 11 October 2019 © The Author(s) 2019
Abstract A growing experimental literature studies the endogenous choice of institutions to solve cooperation problems arising in prisoners’ dilemmas, public goods games, and common pool resource games. Participants in these experiments have the opportunity to influence the rules of the game before they play the game. In this paper, we review the experimental literature of the last 20 years on the choice of institutions and describe what has been learned about the quality and the determinants of institutional choice. Cooperative subjects and subjects with optimistic beliefs about others often vote in favor of the institution. Almost all institutions improve cooperation if they are implemented, but they are not always implemented by the players. Institutional costs, remaining free-riding incentives, and a lack of learning opportunities are identified as the most important barriers. Unresolved cooperation problems, like global climate change, are often characterized by these barriers. The experimental results also show that cooperation tends to be higher under endogenously chosen institutions than exogenously imposed institutions. However, a significant share of players fails to implement the institution and they often perform poorly, which is why we cannot conclude that letting people choose is better than enforcing institutions from outside. Keywords Literature review · Experiments · Cooperation · Public goods · Endogenous institutional choice · Voting
Electronic supplementary material The online version of this article (https://doi.org/10.1007/s1068 3-019-09629-8) contains supplementary material, which is available to authorized users. * Astrid Dannenberg dannenberg@uni‑kassel.de Carlo Gallier [email protected] 1
Department of Economics, University of Kassel, 34117 Kassel, Germany
2
Department of Economics, University of Gothenburg, 405 30 Gothenburg, Sweden
3
ZEW – Leibniz Centre for European Economic Research, L7, 1, 68161 Mannheim, Germany
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Vol.:(0123456789)
A. Dannenberg, C. Gallier
JEL Classification C72 · C91 · C92 · D02 · D70 · H41
1 Introduction The tension between self-interest and collective interest is a central challenge in all social relationships and understanding how societies can solve the challenge and achieve cooperation among members is important to economics and other disciplines. In many cooperation problems, societies themselves determine the rules that govern the interactions of their members. For instance, government representatives negotiate and establish rules on how to protect global security or prevent climate change. Users of common pool resources develop rules to ensure sustainable harvest of the resource. Work teams establish rules on how to reward positive contributions to the common goal and how to punish free riders. In all thes
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