Working Paper #2010-09 – Context effects in a negative externality experiment

Department of Economics

University of Delaware

Working Paper #2010-09

Context effects in a negative externality experiment

Kent D. Messer, Jordan F.Suter, Jubo Yan

ABSTRACT

This study investigates the degree to which framing and context influence observed rates of free-riding behavior in a negative externality laboratory experiment. Building on the work of Andreoni (1995a) and Messer et al. (2007) we frame the decision not to contribute to a public fund as generating a negative externality on other group members. The experimental treatments involving 252 subjects vary communication, voting, and the status quo of the initial endowment. Results indicate that allowing groups the opportunity to communicate and vote significantly reduces rates of free-riding, and this effect is especially pronounced when initial endowments are placed in the private as opposed to the public fund.

JEL Codes : C91, C92, H4

Keywords: Negative externality, voluntary contribution mechanism, cheap talk, voting, status quo bias, experimental economics