TERCER CICLO (CURSO IV)

A potential remedy to the frequent rejections of the symmetric institution by low type players is to design an asymmetric institution that ensures the maximum possible payoffs among the set of all equitable payoff allocations. Obviously, un- der the asymmetric institution, the low type players’ obligation must be lower than under the symmetric institution. As a drawback, the implementation of the asymmetric institution results in a lower level of public good provision than the implementation of the symmetric institution.

Concerning results in treatment HET-ASYM, 91.0% of players vote in favor of implementing the asymmetric institution which results in 77.2% successful implementations. Thus, with heterogeneous players, the asymmetric institution that guarantees equal payoffs for both player types is more than 20% points more likely to be implemented than the symmetric one that induces the effi- cient outcome, but unequal payoffs across player types (MWU, p = 0.08 for the implementation rate and p = 0.16 for the share of affirmative votes). The higher implementation rate is due to the substantially higher likelihood of low types to vote in favor of the asymmetric institution than the symmetric one: 94.1% instead of 59.7% (MWU, p < 0.01). With 89.5%, the high types’ share of affir- mative votes for the asymmetric institution is only slightly lower than the 95.9% affirmative votes for the symmetric institution (MWU, p = 0.04).

While implementation rates differ markedly for treatment HET-SYM and HET-ASYM, average contributions do not: 13.9 units in HET-ASYM compared to 14.2 units in HET-SYM (MWU, p = 0.97).17 There are two opposing effects

16

Although the focus of our paper is on distributive fairness, subjects’ behavior could be driven by procedural fairness concerns, too. While economists have started studying the latter approach only lately (the first economic experiments are reported in Bolton et al. (2005); see also Krawczyk (2011), for a theoretical model), the idea of procedural fairness has been prominent in psychol- ogy for some decades already (see, for example, Tyler and Lind (2000) for a summary). Barrett- Howard and Tyler (1986) report that procedural fairness is equal in importance to distributive fairness for subjects who are confronted with allocation decisions. This could provide a potential explanation for the 84% approval rate in HET-SYM, namely if subjects think that equal obliga- tions are procedurally fair in general and/or randomly assigning heterogeneity in the MPCRs to subjects is procedurally fair. Interestingly, if this line of reasoning indeed applies it seems to be done in a self-serving manner, because the support for the institution is much stronger among high types than among low types. We thank an anonymous referee for pointing this out.

17

In line with the theoretical predictions, we observe that in HET-ASYM low and high types are equally well off on average. High types’ average payoff is 34.0, low types’ average payoff is 33.6. In contrast, in treatment HET-SYM, average payoffs of low types are substantially lower

that cancel each other out: while the higher implementation rate in HET-ASYM increases contributions, implementing the asymmetric institution instead of the symmetric one reduces contributions of the low types from 20 to 8 units. Com- pared to the benchmark VCM game with heterogeneous players, average contri- bution levels are significantly higher in treatment HET-ASYM than in treatment HET-VCM (MWU, p < 0.01). We summarize results for treatment HET-ASYM below.

Result 4:

a) In treatment HET-ASYM, the implementation rate is higher than in treatment HET-SYM. In contrast, average contributions in treatments HET- ASYM and HET-SYM are very similar.

b) In treatment HET-ASYM, average contributions are significantly higher than in treatment HET-VCM.

Overall, designing institutions that address players’ demand for equal bene- fits from institution formation seems to be very successful in raising the imple- mentation rate. In many contexts, a higher rate of institution formation could be considered beneficial per se, e.g., due to raising reliability of public good pro- vision or by potentially triggering future institutionalized cooperation. However, increasing the implementation rate by voting on an asymmetric institution will always come at the cost of institutionalizing less than efficient levels of public good provision.

To rule out that the high implementation rate in HET-ASYM is due the asym- metry in contributions per se, we now turn to treatment HOM-ASYM. Here, we can explore how the asymmetric institution performs if players are homoge- neous, i.e., when it introduces binding rules concerning contributions to poten- tially increase efficiency, but those rules induce unequal payoffs across players.

Proposing an asymmetric institution to homogeneous players receives rela- tively low levels of support. The average share of affirmative votes ranges be- tween 40% and 70% over time, resulting in an average implementation rate of only 26.7%. For players with an obligation of 8 units, the share of affirmative votes is 67.7%, while it is 20 percentage points lower for those with an obliga- tion of 20. This might be because both types of players possibly have a motive to vote against the institution, namely aversion to advantageous inequality (for players with an obligation of 8 units) and aversion to disadvantageous inequal- ity (for players with an obligation of 20 units). The share of affirmative votes as well as the implementation rate is significantly higher in treatment HET-ASYM than in HOM-ASYM (MWU, p < 0.01 for both).

than those of high types: 28.2 instead of 37.2. Again, this finding is in line with the theoretical predictions.

2.4 Results | 23

We have already shown that, with homogeneous players, proposing a sym- metric institution helps to overcome the social dilemma of public good provision. This is not the case with an asymmetric institution. The average contributions in treatment HOM-ASYM are not significantly different from average contribu- tions in treatment HOM-VCM (MWU, p = 0.75) and significantly lower than in treatment HOM-SYM (MWU, p < 0.01).

Finally, the asymmetric institution performs worse for homogeneous than for heterogeneous players, i.e., when it introduces inequality instead of addressing it. With homogeneous players, both the share of affirmative votes and the aver- age contributions are lower (MWU, p < 0.01 for affirmative votes and p = 0.04 for contributions). This strongly suggests that the success of the asymmetric insti- tution for heterogeneous agents is indeed due to addressing payoff inequalities between agents. Below, we summarize results for treatment HOM-ASYM.

Result 5:

a) Average contributions in treatment HOM-ASYM and HOM-VCM do not differ significantly.

b) In treatment HOM-ASYM, implementation rate and average contribu- tions are significantly lower than in treatment HOM-SYM.

c) In treatment HOM-ASYM, implementation rate and average contribu- tions are significantly lower than in treatment HET-ASYM.