Taxation, Redistribution and Observability in Social Dilemmas

GATE WP 1726, October 2017

62 Pages Posted: 5 Oct 2017 Last revised: 7 Oct 2018

See all articles by Daniel Brent

Daniel Brent

Pennsylvania State University

Lata Gangadharan

Monash University

Anca Mihut

University of Lyon 2

Marie Claire Villeval


Multiple version iconThere are 2 versions of this paper

Date Written: October 4, 2017


In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.

Keywords: Common Pool Resource game, taxation mechanisms, observability, cooperation, heterogeneity, experiment

JEL Classification: C92, H23, D74

Suggested Citation

Brent, Daniel and Gangadharan, Lata and Mihut, Anca and Villeval, Marie Claire, Taxation, Redistribution and Observability in Social Dilemmas (October 4, 2017). GATE WP 1726, October 2017, Available at SSRN: or

Daniel Brent (Contact Author)

Pennsylvania State University ( email )


Lata Gangadharan

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800

Anca Mihut

University of Lyon 2 ( email )

93 Chemin des Mouilles
Ecully, 69009

Marie Claire Villeval

GATE, CNRS ( email )

93, chemin des Mouilles
Ecully, 69130
+33 472 86 60 79 (Phone)
+33 472 86 60 90 (Fax)


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