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Provision and Maintenance of Common Resources with Asymmetric Power



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Provision and Maintenance of Common Resources with Asymmetric Power Brock Stoddard Indiana University Wylie Hall 307 Office Phone Number 855 9531 Abstract There are examples from the field of groups who pool resources together and designate a leader to distribute the pooled resources Benefits from cooperation in such groups come in varying forms monetary production and emotional In this paper I examine experimentally the emotional benefits from group cooperation In the lab I also examine how well participants cooperate in environments similar to those observed in the field JEL Code C920 Committee Chair James Walker Member Arlington Williams Member Rick Harbaugh 1 1 Introduction Situations with the collective action problem are often observed in the world The collective action problem is that rational behaviour of an individual defined in traditional economic and game theoretic terms leads to suboptimal outcomes from the collective standpoint Rational behavior in these situations implies individuals should free ride off group cooperation Much experimental research among social scientists has focused on institutional arrangements that discourage individual rational behavior by creating incentives that develop cooperation Isaac and Norton 2008 Hamman Weber Woon 2010 Cox Ostrom Walker et al 2009 Baker Walker Williams 2009 Cox Ostrom Walker 2011 Environments that yield cooperation have rules that build trust between members When trust is established a group often sustains cooperation A group without trust likely will not cooperate Benefits from cooperation are monetary emotional and more efficient production Emotional benefits are comradery a sense of community purpose insurance and protection In spite of these benefits cooperation is often not achieved Research indicates that under certain conditions groups can overcome the free riding problem and successfully cooperate cite There are many ways a group can develop trust For instance rewarding and sanctioning mechanisms increase trust and cooperation Sefton Swope Walker cite If group members feel like they are being treated fairly they develop trust Research identified reciprocity others should treat me like I treat them as a measure of fairness cite When a group has a leader the perceived fairness of her policies will impact cooperation Distributive justice is a philosphical normative principle designed to guide the allocation of the benefits and burdens of economic activity1 Economists examining distribu1 Stanford Encyclopedia of Philosphy 1 tive justice found using the trust game 2 a fair leader increases contributions creates an atmosphere to develop comradery and belief in the institution Within a group it is difficult for a group member to be completely impartial or objective about fairness Croson and Konow 2009 Lack of impartiality happens because there are incentives to cooperate and incentives to free ride Adam Smith spoke of an impartial spectator who might have better judgement about fairness than someone involved in a situation If the distribution of resources was decided by a distirbutor from outside the group who given full information and paid a salary independent of her distribution might distribute the resources more justly than someone from within the group Game theory and information economics on the other hand say an impartial spectator would not be better because she has reason to care about the distribution of resources due to moral hazard This will be discussed in more detail later This project experimentally examines a decision environment where group members are endowed with resources They can cooperate by pooling resources to create a group fund Pooled resources are distributed by a leader who depending on the treatment condition is either within the group or outside the group Group members cooperate by contributing to the pool because contributed resources earn a return g This returns simulates utility from participating in a community With this data I examine some important questions Will these decision environments sustain cooperation Will cooperation be higher with a distributor outside or within the group How will levels of cooperation differ in these treatments than in experiments with similar decision environments in the public good common pool resource and distributive justice literatures 2 Motivation Examples From the Field 2 Marco Faravelli How context matters A survey based experiment on distributive justice 2007 2 Groups in the field implementing economic systems with these decision settings motivated this project These groups often have religious motivations for implementing such a system In the Bible Acts chapter 5 and 6 a communal like economic system is introduced where church members created a pool of resources The leaders of the church managed the pool Many Christian groups on the American frontier in the 1800 s implemented this vaguely defined Biblical system 3 The Mormon church lead by Joseph Smith and then Brigham Young implemented this type of system In Mormon theology a principle called the Law of Consecration calls for members to donate all of their time talents abilities and material possessions to the church Chasing Consecration Levine Mormons in the 1800 s were expected to donate all their property to church An assigned Bishop oversaw the collection and distribution of the pool of resources This implementation of the Law of Consecration was discontinued in the mainstream Mormon church The church of Jesus Christ of Latter day Saints or LDS but is still implemented today by a fundamentalist splinter from the LDS church the Fundamentalist Church of Jesus Christ of Latter Day saints or FLDS In addition to Christian implementation of this type of economic system a current Muslim philosopher Tariq Ramadan has called for a variation of this system by Western Muslims Reason Revelation and Economic Conscientious Objection An Analysis of Tariq Ramadans Collectivist Economic Thought Chase Knowles In her Noble Prize speech at IU Elinor Ostrom referenced nonreligious communal groups in Indiana practicing similar economic systems http newsinfo iu edu news page normal 13363 html Public good and CPR experiments have previously only used 1 N distributions Trust games allow responders to use distribute rules other than 1 N This is a generalized trust game There have been experiments where a group member has asymmetric power Haman Weber Woon 2010 allowed a group elected leader to determine each


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