Mistrust and Opposition to Large-Scale Projects: An Experiment on the Role of Uncertainty

Abstract

The realization of large-scale projects such as landfills, power plants, etc. is often hindered by the opposition of the possible host community. I study the case in which the opposition emerges from the mistrust of the host community toward the proposer of the project due to an informational asymmetry on the project's returns. In a novel laboratory experiment, I compare a baseline opposition game to treatments including the possibility to endogenously disclose information about the project or to offer compensatory transfers to the host. Both tools are more effective than expected in mitigating oppositions, but have heterogeneous impacts on the creation of social surplus and its allocation among the stakeholders.

Keywords: trust, NIMBY; Information disclosure; Compensatory transfers

JEL Classification: C70; C90; D03; Q53