Laboratory Test of a Non-Point Water Pollution Control Program: Monetary and Psychological Incentives

41 Pages Posted: 5 Jun 2006

See all articles by Helen N. Pushkarskaya

Helen N. Pushkarskaya

University of Kentucky - Department of Agricultural Economics

Hal R. Arkes

Ohio State University - Department of Psychology

Date Written: November 15, 2006

Abstract

This paper reports the results of laboratory test of the performance of a non-point source (NPS) water pollution abatement scheme suggested by Pushkarskaya and Randall (2006). The scheme is based on voluntary participation in the non-point source pollution control program, and ties individual payoffs to collective performance of the farmers in the watershed.

First, we formulate the set of predictions based on both monetary (traditionally used by economists) and psychological (usually studied by psychologists) incentives on how the contract will perform in laboratory in four different settings with undergraduate students as subjects. Then we test these predictions. The experimental data demonstrated that predictions based on both monetary and psychological incentives are very accurate. Specifically, the participation in the program was high, and on average players chose strategies that were close to pay-off dominant, which caused the overall efficiency of the contract to be sufficiently high. However, since the scheme created simultaneously incentives for spitefulness, free-riding, altruism and negative reciprocity the efficiency of a contract was influenced by the composition of groups in terms of players' social types in the settings with no uncertainty. However, in the settings with production and weather uncertainty present, the performance of the scheme was not sensitive to the composition of groups in terms of players' social types. All these results, however, were obtained in the lab with undergraduate students as subjects. At the end of the paper we provide a short discussion on what effects might still hold in the field.

Keywords: non-point source pollution, spite, altruism-seeking, reciprocity, laboratory testing

JEL Classification: C7, C92, D7, Q25

Suggested Citation

Pushkarskaya, Helen N. and Arkes, Hal R., Laboratory Test of a Non-Point Water Pollution Control Program: Monetary and Psychological Incentives (November 15, 2006). Available at SSRN: https://ssrn.com/abstract=906129 or http://dx.doi.org/10.2139/ssrn.906129

Helen N. Pushkarskaya (Contact Author)

University of Kentucky - Department of Agricultural Economics ( email )

Lexington, KY 40546
United States

Hal R. Arkes

Ohio State University - Department of Psychology ( email )

240N Lazenby Hall
1885 Neil Avenue
Columbus, OH 43210
United States
614-292-1592 (Phone)
614-688-3984 (Fax)

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