THEORIES OF COMMITMENT, ALTRUISM AND RECIPROCITY: EVIDENCE FROM LINEAR PUBLIC GOODS GAMES

I. INTRODUCTION Individuals in the United States made over $185 billion in philanthropic contributions in 2004, given in Giving USA (1996). (1) This behavior is inconsistent with traditional utility theory in which individuals care only for their own consumption. A number of alternative theories have been invoked to explain such philanthropic behavior in this and in other settings. This paper describes a set of experiments, which distinguish between three competing theories: commitment, altruism, and reciprocity, by testing their comparative statics predictions in a linear public goods setting. In commitment theories, individuals choose the actions they would most prefer everyone would choose (Laffont 1975, and Harsanyi 1980). Thus, they choose the action that maximizes their private payoff, assuming that everyone else chooses the same action they do. Commitment theories are consistent with observed philanthropic behavior, voluntary cooperation in social dilemmas like water conservation (Laffont 1975), tax evasion (Baldry 1987), and voting, (Struthers and Young 1989), as well as voluntary contributions to public goods. In altruism theories, the consumption of others appears positively as an argument in an individual's utility function (Becker 1974, Andreoni 1989, 1990). Models of altruism are also consistent with observed philanthropic behavior and have been used to explain intergenerational bequests, social security and other welfare systems (Coate 1995), and helping behavior in the workplace (Rotemberg 1994), as well as voluntary contributions to public goods. In contrast, Sugden (1984) proposes a theory in which the principle of reciprocity acts as a constraint on traditional individual utility maximization. The principle says (roughly) that an individual may not tree, cheap, or easy ride when others are contributing. Models of reciprocity are also consistent with observed philanthropic behavior (when others are contributing) and have been used to explain individual behavior in tax evasion (Bordignon 1993), helping in the workplace (Frey 1993) and labor markets (Akerlof 1982), as well as voluntary contributions to public goods. This paper presents four separate experiments designed to distinguish between these theories by comparing their comparative statics predictions. The results of the first experiment (presented in Section IV) demonstrate a significant and positive relationship between an individual's own contribution and his beliefs of the contributions of others in his group, consistent with theories of reciprocity and inconsistent with traditional self-interested theories or theories of commitment or altruism. The second and third experiments (presented in Section V) test the robustness of the first experiment by comparing an individual's own contributions and the actual contributions of others in his group in different settings. Similar results are generated. The final experiment (presented in Section VI) further investigates the specific type of reciprocity our subjects demonstrate. We find evidence for median reciprocity, where players try to match the median contribution of the rest of his group, rather than the minimum or maximum. This paper is organized as follows. Section II briefly describes the public goods production function and the voluntary contribution mechanism used in this experiment. Section III outlines the three classes of theories and their implications. In Section IV we present the experiment and results designed to distinguish between the competing theories. Section V describes two additional experiments designed to test for the robustness of our results. Section VI describes another experiment, which investigates individual behavior in more detail. Finally, Section VII concludes. II. PURE PUBLIC GOODS AND THE VOLUNTARY CONTRIBUTION MECHANISM Pure public goods are goods that are both nonrival and nonexcludable. (2) The experiments described in this paper use a linear and pure public good to distinguish between our competing hypotheses. …