Incomplete Information Strengthens the Effectiveness of Social Approval

Abstract

We present a theoretical model of a public good game in which the expression of social approval induces pro-social behavior. Using a laboratory experiment with earned heterogeneous endowments, we test our model. The main hypothesis is that the expression of social approval increases cooperative behavior even if reputation building is impossible. We vary the information available and investigate how this affects the expression of social approval and individual contributions. The expression of social approval significantly increases contributions. However, the increase is smaller if additional information is provided, suggesting that social approval is more effective if subjects receive a noisy signal about others’ contributions.

JEL Classification: C72, C91, D71, D83