Explaining Behavior in Public Goods Games: How Preferences and Beliefs Affect Contribution Levels

Abstract

There is a large body of evidence showing that a substantial proportion of people contribute positive amounts in public goods games, even if the situation is one-shot and completely anonymous. Clearly, this is in conflict with the prediction of neoclassic economic theory. One of the most promising explanations of why people contribute anything in this context draws upon an interaction between positive social preferences and beliefs about the preferences and anticipated behavior of others. We follow this line of thinking and investigate the predictive power of social preferences and beliefs on contribution levels in both a one-shot and a repeated linear public goods game. We report on the degree to which individual contributions can be explained when individual preferences and beliefs are taken into account, and additionally how preferences and beliefs change in response to the behavior of others.

Keywords: Social Value Orientation (SVO), Social preferences, Beliefs, Individual differences, Public Goods

JEL Classification: C91, D64, H41