Voluntary Contribution Mechanism Played over an Infinite Horizon

Abstract

In recent literature, empirical evidence shows that cooperation improves when games are infinitely repeated. We experimentally investigate the evolution of voluntary contributions to a public good played over an infinite horizon. The experiment also includes sessions of voluntary contribution mechanism (VCM) games played over a finite horizon as a control. We find that in infinitely repeated VCM games (1) when subjects are inexperienced, there is no difference of contributions compared with finitely repeated games; (2) contributions remain at the same level after an unexpected restart; (3) most groups do not have a monotonic trend of contribution with repetition. The data provides strong support for heterogeneous subjects, which may explain the non-monotonic trend of average contributions in infinitely repeated VCM games. This non-monotonic trend is caused by one category of subjects who expect others to contribute in period t as they did in period t-1.

Keywords: voluntary contribution mechanism, Infinite horizon, restart effect, non-monotonic trend, heterogeneous subjects

JEL Classification: C91, C71, H41