Panic in the Lab: The Effect of Extreme External Risks and Bolstering Cooperation in Public Goods Games

21 Pages Posted: 2 Jun 2023 Last revised: 9 Jan 2024

See all articles by Sascha Schweitzer

Sascha Schweitzer

Reutlingen University; University of Bayreuth

Peiyao Shen

University of Queensland - School of Economics

Johannes Ulrich Siebert

Management Center Innsbruck

Date Written: January 08, 2024

Abstract

Rare but extreme events, such as pandemics, terror attacks, and stock market collapses, pose a risk that could undermine cooperation in societies and groups. We extend the public goods game (PGG) to investigate the relationship between rare but extreme external risks and cooperation in a laboratory experiment. By incorporating risk as an external random variable in the PGG, independent of the participants’ contributions, we preserve the economic equilibrium of non-cooperation in the original game. Furthermore, we examine whether cooperation can be restored by the relatively simple intervention of informing about countermeasures while keeping the actual risk constant. Our experimental results reveal that on average extreme risks indeed decrease contributions by about 20%; however, countermeasure information increases contributions by about 10%. Specifically, in the first interactions, cooperation levels can even reach those observed in the riskless baseline. Our results suggest that countermeasure information could help reinforce social cohesion and resilience in the face of rare but extreme risks.

Keywords: extreme external risks, cooperation in public goods games, laboratory experiment, societal resilience, countermeasure information

JEL Classification: C91, H41, H56, D81

Suggested Citation

Schweitzer, Sascha and Shen, Peiyao and Siebert, Johannes Ulrich, Panic in the Lab: The Effect of Extreme External Risks and Bolstering Cooperation in Public Goods Games (January 08, 2024). Available at SSRN: https://ssrn.com/abstract=4465082 or http://dx.doi.org/10.2139/ssrn.4465082

Sascha Schweitzer (Contact Author)

Reutlingen University ( email )

Alteburgstr. 150
Reutlingen, 72762
Germany

University of Bayreuth ( email )

Universitatsstr 30
Bayreuth, D-95447
Germany

Peiyao Shen

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia

Johannes Ulrich Siebert

Management Center Innsbruck ( email )

Universitaetsstr. 15
Innsbruck, 6020
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
49
Abstract Views
231
PlumX Metrics