General Seminar - Evan Calford (RSE ANU)

Contingent Reasoning and Dynamic Public Goods Provision

Abstract:  Individuals often possess private information about the common value of a public good. Their contributions toward funding the public good can therefore reveal information that is useful to others who are considering their own contributions. This experiment compares static and dynamic contribution decisions to determine how hypothetical contingent reasoning differs in dynamic decisions. The timing of individuals' sequential contribution decisions is endogenous. Funding the public good is more efficient with dynamic than static decisions in equilibrium, but this requires the decision-maker to understand that in the future they can learn from past events. Our results indicate that a substantial fraction of subjects appreciate the benefits of deferring choice to learn about and condition their behavior on the contribution decisions of others. Many subjects, however, exhibit a bias away from rational choices in the direction of Cursed equilibrium, and some appear to extract information only from prior, and not concurrent, behaviour.

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