Public goods game

The public goods game is a standard of experimental economics. In the basic game, subjects secretly choose how many of their private tokens to put into a public pot. The tokens in this pot are multiplied by a factor (greater than one and less than the number of players, N) and this 'public good' payoff is evenly divided among players. Each subject also keeps the tokens they do not contribute. The public goods game is a standard of experimental economics. In the basic game, subjects secretly choose how many of their private tokens to put into a public pot. The tokens in this pot are multiplied by a factor (greater than one and less than the number of players, N) and this 'public good' payoff is evenly divided among players. Each subject also keeps the tokens they do not contribute. The group's total payoff is maximized when everyone contributes all of their tokens to the public pool. However, the Nash equilibrium in this game is simply zero contributions by all; if the experiment were a purely analytical exercise in game theory it would resolve to zero contributions because any rational agent does best contributing zero, regardless of whatever anyone else does. This only holds if the multiplication factor is less than the number of players, otherwise the Nash equilibrium is for all players to contribute all of their tokens to the public pool. In fact, the Nash equilibrium is rarely seen in experiments; people do tend to add something into the pot. The actual levels of contribution found varies widely (anywhere from 0% to 100% of initial endowment can be chipped in). The average contribution typically depends on the multiplication factor. Capraro has proposed a new solution concept for social dilemmas, based on the idea that players forecast if it is worth to act cooperatively and then they act cooperatively in a rate depending on the forecast. His model indeed predicts increasing level of cooperation as the multiplication factor increases. Depending on the experiment's design, those who contribute below average or nothing are called 'defectors' or 'free riders', as opposed to the contributors or above average contributors who are called 'cooperators'. 'Repeat-play' public goods games involve the same group of subjects playing the basic game over a series of rounds. The typical result is a declining proportion of public contribution, from the simple game (the 'One-shot' public goods game). When trusting contributors see that not everyone is giving up as much as they do they tend to reduce the amount they share in the next round. If this is again repeated the same thing happens but from a lower base, so that the amount contributed to the pot is reduced again. However, the amount contributed to the pool rarely drops to zero when rounds of the game are iterated, because there tend to remain a hard core of ‘givers’. One explanation for the dropping level of contribution is inequity aversion. During repeated games players learn their co-player's inequality aversion in previous rounds on which future beliefs can be based. If players receive a bigger share for a smaller contribution the sharing members react against the perceived injustice (even though the identity of the “free riders” are unknown, and it’s only a game). Those who contribute nothing in one round, rarely contribute something in later rounds, even after discovering that others are. Transparency about past choices and payoffs of group members affects future choices.  Studies show individuals in groups can be influenced by the group leaders, whether formal or informal, to conform or defect. Players signal their intentions through transparency which allows “conditional operators” to follow the lead. If players are informed of individual payoffs of each member of the group it can lead to a dynamic of players adopting the strategy of the player who benefited the most (contributed the least) in the group. This can lead a drop in cooperation through subsequent iterations of the game. However, if the amount contributed by each group member is not hidden, the amount contributed tends to be significantly higher. The finding is robust in different experiment designs: Whether in 'pairwise iterations' with only two players (the other player's contribution level is always known) or in nominations after the end of the experiment.