Funded FWF stand alone project

The FWF funds the project "Providing Ecosystem Services When Outsiders Support Insiders" from Esther Blanco. The project is carried out with the support of Natalie Struwe and James M. Walker (Indiana University).

This project investigates the cooperation of two groups. The difference between the two groups is that the first group (we call them insiders) can take actions that benefit both groups. We call these prosocial actions that provide a public good. The second group (we call them outsiders) cannot take such actions. However, they can help the insiders by subsidizing their prosocial actions. For example, those who do not live or own land in a forest ecosystem (the outsiders), cannot directly make decisions on the status of the ecosystem. Only those who live in the forest (the insiders) can take actions to maintain or improve the ecosystem. Yet, the outsiders can still benefit from the public goods of biodiversity conservation, climate protection or watershed management that the forest generates. So, the outsiders could subsidize the insiders to take actions that improve the ecosystem.

In both groups, there is a tension between what is best for the individual and what is best for the group. It is costly to insiders to choose prosocial actions that improve the ecosystem. At the same time, it is costly to outsiders to subsidize the actions of the insiders. Broadly, we are interested in the decision making of outsiders to compensate insiders for their prosocial provision of public goods by using monetary payments, as well as the willingness of insiders to respond to the monetary payments and provide even greater levels of the public good.

More specifically, in this project, we will explore alternative ways and situations in which to implement the outsider’s compensations, working on ways to increase the prosocial actions of insiders. Broadly, we plan to study three questions. First, when and how do the rules for sharing subsidies among insiders affect their decisions to provide the public good and the decisions of outsiders to provide subsidies? Second, to what extent does competition among the insiders for subsidies increase their provision of the public good? Finally, how will cooperation among insiders and outsiders differ if the number of outsiders changes or the effort required of insiders to provide public goods changes?

We will address these topics using laboratory economic experiments. Experiments are particularly useful in studying the decision making of people in different decision environments resembling the real-world setting of interest. Because experiments provide a way for the experimenter to systematically vary the rules of decision-making and the incentives for alternative outcomes, they can generate (causal) evidence on the extent that changes in behavior are a result of variations in the rules and incentives.




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