Experiments on the Fragility of Cooperation and Mechanisms to Overcome this Problem

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In experimental economics cooperation is frequently modeled
by a so-called public-good design. This design tries to depict the
problem that cooperation is benefi cial for every participant but
that there are individual incentives to free-ride, i.e., to invest no
personal effort to increase the common welfare. In public-good
experiments cooperation usually breaks down due to imperfect
conditional cooperation if measures like sanction possibilities,
reputation-building or communication are absent.
We contribute to the literature in a number of ways. For example
we introduce a new dynamic public-good design to analyze
whether subjects behave differently when they do not receive
new resources in a multiperiod public-good design. We further
provide a monitoring mechanism that mitigates the free-riding
problem, in the fi rst study with a linear and in a second study
with a non-linear production function. However, the costly
implementation of the monitoring in itself represents either a
(second-level) step-level public-good or a second-level linear
public-good in the latter case. Finally we introduce a limit on
punishment.