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Experience and History: An Experimental Approach to Generational Heterogeneity

Experience and History: An Experimental Approach to Generational Heterogeneity

Marianna Baggio (University of Trento, Trento, Italy) and Luigi Mittone (University of Trento, Trento, Italy)
Copyright: © 2016 |Pages: 23
DOI: 10.4018/IJABE.2016100101
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Abstract

The development and use of long-lived public goods involves more than one demographic generation, leaving the classic literature on voluntary provisions partially unfit to explain complex phenomena such as welfare systems, climate policies and major infrastructure projects. This paper proposes a model that explains how equilibrium is reached in a context where heterogeneity is linked to seniority and strategic interaction is finitely repeated. Within this model the case of intergeneration public goods production is explained using a redistribution rule that benefits the younger players, as a compensation for their inexperience. Experimental evidence shows that subjects who belong to low or middling marginal per capita return types are negatively affected by heterogeneity, whereas groups benefit from the presence of experienced subjects. More importantly, results show that becoming disadvantaged (lowering the marginal per capita return of individuals in time) has negative effects on the provision of public goods, if compared to a situation where the disadvantage is constant in time (same low marginal per capita return in time).
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2. Theoretical And Experimental Background

This paper lies at the intersection of the literatures on repeated public good games, the effects of heterogeneity on cooperation, overlapping generations (OLG) and evolution, adaptation and learning in voluntary contribution experiments.

Public good games have been widely used in experimental economics in order to study the mechanisms behind free riding and cooperation. The literature on voluntary contribution mechanisms is extensive, especially in the context of homogenous groups (for a survey see Ledyard, 1995). Previous experimental research in this field has revealed that one-shot games contributions are relatively high (around 40% to 60% of the initial endowment) while finitely repeated public good games are characterized by decay in contributions over time (Isaac, McCue and Plott, 1985).

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