Private Goods, Public Goods, and Common Pools with Homo Reciprocans

1. IntroductionJames C. Cox Department of Economics, Georgia State University 2011 President of the Southern Economic Association (Figure omitted. See article image.)Social dilemmas characterize environments in which individuals' exclusive pursuit of their own material self-interest can produce inefficient outcomes such as those resulting from under-provision of public goods and over-appropriation of common pool resources. Under-provision is manifested in foregone opportunities to create surplus through provision of a public good with greater value than the sum of its private costs. In a conceivable extreme outcome, free-riding on voluntary provision can lead to outright failure to provide a public good. Over-appropriation is manifested in realized destruction of surplus through appropriation of private goods with a sum of values less than the value of the common pool that has been exploited. In a conceivable extreme outcome, competition under the "rule of capture" for appropriation can lead to destruction of the common pool, a tragedy of the commons.In practice, some public goods are voluntarily provided in positive (not necessarily optimal) amounts. And some common pools are maintained (not necessarily optimally) through voluntary cooperation. In this way the most pessimistic predictions coming from models of competition between narrowly selfish agents are often not manifested in outcomes. The question is "why?" Or, more descriptively, what are some answers to many specific questions about voluntary cooperation in environments characterized by social dilemmas?This article addresses the following questions: Does reciprocity support cooperative behavior that ameliorates under-provision? Is over-appropriation of a common pool less of a problem when agents' behavior is characterized by reciprocity? Is reciprocity more or less effective in promoting efficiency in an environment with public good provision or in one with common pool appropriation? Does asymmetric power exacerbate or ameliorate under-provision and over-appropriation? How can experiments be used to address these questions? Does behavior in the experiments support or fail to support alternative theories that have testable implications for agent behavior in environments with public goods and common pools?Dilemmas can also arise in environments with only private goods when opportunities for cooperatively increasing payoffs can be realized or squandered. Examples of such environments are provided by the (textbook) Stackelberg duopoly game and the investment game (Berg, Dickhaut, and McCabe 1995). I ask whether experiments reveal cooperative behavior in these private property games and whether the same theory that organizes data from environments with public goods or common pools can also organize data from duopoly and investment games.There are large bodies of literature spanning several disciplines devoted to exploring questions about public good provision, common pool appropriation, and private property allocation. Surveying that literature is not feasible given the space available here and would in any case detract from the sharp focus I want to give to one approach. That approach is based on construction of pairs of (money) payoff equivalent games and design of experiments to get empirical insights from play of the games. Two types of game pairs are constructed: games with simultaneous moves by agents with the same feasible choices and games with sequential moves in which one of the movers has asymmetric power to affect final allocations.The two games in each pair with either simultaneous or sequential moves are constructed to be (money) payoff equivalent. The two games in each pair are also strategy equivalent for the homo economicus model of narrowly selfish preferences and for models of social preferences in which preferences over distributions of material outcomes are a fixed characteristic of an agent (Fehr and Schmidt 1999; Bolton and Ockenfels 2000; Charness and Rabin 2002; Cox and Sadiraj 2007). …