Denial and Alarmism in Collective Action Problems

Tinbergen Institute Discussion Paper 2018-019/I

50 Pages Posted: 7 Mar 2018

See all articles by Manuel Foerster

Manuel Foerster

University of Hamburg - Department of Economics

Joel J. van der Weele

University of Amsterdam - Center for Experimental Economics and political Decision making (CREED); Tinbergen Institute; Center for Financial Studies (CFS)

Date Written: February 28, 2018

Abstract

We analyze communication about the social returns to investment in a public good. We model two agents who have private information about these returns as well as their own taste for cooperation, or social preferences. Before deciding to contribute or not, each agent submits an unverifiable report about the returns to the other agent. We show that even if the public good benefits both agents, there are incentives to misrepresent information. First, others’ willingness to cooperate generates an incentive for “alarmism”, the exaggeration of social returns in order to opportunistically induce more investment. Second, if people also want to be perceived as cooperators, a “justification motive” arises for low contributors. As a result, equilibrium communication features “denial” about the returns, depressing contributions. We illustrate the model in the context of institutional inertia and the climate change debate.

Keywords: Cheap Talk, Cooperation, Image Concerns, Information Aggregation, Public Goods

JEL Classification: C72, D64, D82, D83, D91

Suggested Citation

Foerster, Manuel and van der Weele, Joel J., Denial and Alarmism in Collective Action Problems (February 28, 2018). Tinbergen Institute Discussion Paper 2018-019/I. Available at SSRN: https://ssrn.com/abstract=3135783 or http://dx.doi.org/10.2139/ssrn.3135783

Manuel Foerster (Contact Author)

University of Hamburg - Department of Economics ( email )

Von-Melle-Park 5
room 2128 C rise
Hamburg, 20146
Germany

Joel J. Van der Weele

University of Amsterdam - Center for Experimental Economics and political Decision making (CREED) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

HOME PAGE: http://https://sites.google.com/site/joelvdweele/

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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