Analysing Group Contract Design Using a Lab and a Lab-in-The-Field Threshold Public Good Experiment

CentER Discussion Paper Series No. 2018-049

27 Pages Posted: 14 Dec 2018

See all articles by Jetske Bouma

Jetske Bouma

PBL Netherlands Environmental Assessment Agency (The Hague)

T.T.B. Nguyen

Tilburg University - Tilburg University School of Economics and Management

Eline van der Heijden

Tilburg University, CentER

Justin Dijk

VU University Amsterdam

Date Written: November 22, 2018

Abstract

This paper presents the results of a threshold public goods game experiment with heterogeneous players. The experiment is designed in close collaboration with the Dutch association of agri-environmental farmer collectives. Subjects are recruited at a university (“the lab”) and a farm management training centre (“lab-in-the-field”). The treatments have two different distribution rules which are varied in a within-subjects manner. After subjects have experienced both, they can vote for one of the two rules: either a differentiated bonus that results in equal payoff for all, or an undifferentiated, equal share of the group bonus. In a between-subjects manner, subjects can vote for a (minimum or average) threshold or are faced with an exogenous threshold. The results indicate that exogenous thresholds perform better, possibly because the focal point they provide facilitates coordination. With regard to the two distribution rules, the results are mixed: average contributions and payoffs are higher in the lab under the ‘equal-payoff’ rule, but there is no significant difference between the two in the lab-in-the-field, possibly because contributions in the lab-in-the-field are much less efficient. Overall, our results suggest that environmental payment schemes should not only consider farmer heterogeneity in the design of group contracts, but pay explicit attention to coordination problems as well.

Keywords: threshold public goods games, endogenous choice, lab-in-the-field experiment, collective agri-environmental management, group contracts, distribution rules, heterogeneous subjects

JEL Classification: H41, C92, C93, D70, Q57

Suggested Citation

Bouma, Jetske and Nguyen, T.T.B. and van der Heijden, Eline and Dijk, Justin, Analysing Group Contract Design Using a Lab and a Lab-in-The-Field Threshold Public Good Experiment (November 22, 2018). CentER Discussion Paper Series No. 2018-049, Available at SSRN: https://ssrn.com/abstract=3289072 or http://dx.doi.org/10.2139/ssrn.3289072

Jetske Bouma (Contact Author)

PBL Netherlands Environmental Assessment Agency (The Hague) ( email )

Oranjebuitensingel 6
The Hague, 2511 VE
Netherlands

T.T.B. Nguyen

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Eline Van der Heijden

Tilburg University, CentER ( email )

P.O. Box 90153
Department of Economics
5000 LE Tilburg
Netherlands

Justin Dijk

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

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