Announcement, Observation, and Honesty in the
Voluntary Contributions Game
By
Laurent Denant-Boemont, David Masclet and Charles Noussair∗
January, 2005
Abstract
In this paper, we study the effect of announcement and observation on voluntary public good
provision. We find that requiring individuals to make a non-binding prior public announcement
about their contribution level has no significant effect on average contributions. Making public each
individual’s contribution decision also has no significant impact on contribution levels. However,
requiring announcements, in conjunction with making contribution decisions public, has a
significantly positive effect on the average level of contributions. The treatments, in which
announcements were elicited, permit the truthfulness of subjects’ announcements to be measured.
We find that high contributors are more honest, the truthfulness of others is reciprocated with
greater honesty, and announcements are more honest when contribution decisions are observable.
∗
Denant-Boemont: Université Rennes 1, Rennes, France. Masclet: Université Rennes 1, Rennes, France.
Noussair: Department of Economics, Emory University, 1602 Fishburne Dr., Atlanta, GA 30322-2240, USA.
We thank Gary Bornstein and participants at the June 2004 Economic Science Association Meetings in
Amsterdam for constructive and helpful comments. We thank Elven Priour for programming and organization
of the sessions.
1
1. Introduction
Social dilemmas are situations in which a divergence exists between the outcomes that
result when individual choices are based on self-interest and when they are based on group-interest.
The prisoner’s dilemma and the tragedy of the commons are well-known examples of social
dilemmas. A large and active literature in experimental economics has investigated the behavior of
individuals who face social dilemmas, and the factors that increase the extent of group-oriented
behavior in such situations. The principal conclusion is that most individuals do not act only out of
self-interest, nor do they act exclusively in the group interest. Rather, most individuals’ behavior
tends to reflect both considerations. A number of factors, properties of both the environment and the
rules of interaction, which encourage cooperation, have been identified (see Ledyard, 1995, for a
survey).
One commonly used context, in which the conflict between individual and group incentives
is studied, is the Voluntary Contributions Mechanism. In this game, each individual member of a
group receives an initial endowment of money. Each individual then has an opportunity to
contribute any fraction of his endowment to a “group account”. The allocation decisions are
simultaneous in that others’ choices are unknown at the time an individual makes his own decision.
The total amount of money that all agents contribute to the group account is multiplied by a factor
greater than 1 and then divided equally among all of the members of the group. Each individual has
a dominant strategy to allocate zero to the group account, whereas the highest total group payoff is
reached if all members contribute their entire endowment to the group account. The level of
contribution can be interpreted as a measure of the extent that decisions are socially oriented. The
value of the measure can be compared between treatments to identify factors that influence the level
of cooperation.
The experimental method allows the researcher to control the information individuals have
about other group members regarding their actions and stated intentions. Most previous studies have
considered environments where very little information about other participants’ decisions is
available, prohibiting communication both before and after decisions have been made, and keeping
individual contribution decisions private. However, many social dilemmas in the field do not occur
in environments with this degree of anonymity, but rather are found in contexts in which some
degree of contact between group members occurs before and/or after decisions are taken. In
recognition of the potential importance of such contact, experimental economists have studied the
effect of allowing individuals to acquire information about or from other group members, and have
pursued the issue from several avenues.
2
A number of studies have explored the effect of different types of communication on
outcomes in the Voluntary Contributions Mechanism context (see for example Isaac and Walker,
1988b) and have found that unstructured communication before contribution decisions are made
serves to increase contribution levels. Furthermore, preplay communication changes the time profile
of contribution levels from one that decreases (Isaac and Walker, 1988a), to one that increases, over
time. Ostrom et al. (1994) and Muller and Vickers (2000) obtain similar results in experiments
studying the social dilemma posed by the potential overuse of a common pool resource. Duffy and
Feltovich (2001, 2003) study the effect of communication in a two-person prisoners’ dilemma (one
of the players is permitted to transmit to the other a non-binding pre-play announcement consisting
of an intended choice of action, before the actions are chosen), a social dilemma related to the
voluntary contributions mechanism, and find that the existence of communication increases the
incidence of cooperative play. Non-binding communication has a positive effect on contributions
despite the fact that it does not alter the set of equilibrium outcomes.
Another type of information that has been studied is public observability, on the part of
other group members, of individual decisions. Sell and Wilson (1991) investigate the effect of
public observability in a setting in which past contribution behavior of each member of the group is
made public, and the authors observe an increase in contributions as a result. Duffy and Feltovich
(2001, 2003) observe that displaying a history of each group member’s contribution decisions
increases the average amount contributed. Other studies have shown that associating agents with
their contributions, when combined with an ability to sanction them, can create more cooperative
behavior. For example, Yamagishi (1986), Fehr and Gaechter (2000a), Carpenter (2004), Anderson
and Putterman (2004), Masclet et al. (2003) and others study the effect of allowing agents the
ability to reduce other group members’ payoffs after observing their decisions, and they all find that
this ability induces large increases in contribution rates. Masclet et al. (2003) also show that
allowing agents to observe and to rate the decisions of each other group member, and to transmit the
information to the agent being rated, increases contributions. Rege and Telle (2004) find that
requiring agents to make their contributions while physically located in full view of the other group
members increases contribution levels.
Wilson and Sell (1997) are the only previous authors, to our knowledge, who consider the
joint effect of both pre-play announcements and public observability after contribution decisions are
made. They find that announcement plus observability leads to similar contribution levels as in a
benchmark treatment in which neither instrument is available. However, they obtain other
interesting results that are different in spirit from those of the studies discussed above. They find
that if all players make a non-binding pre-play announcement of a contribution decision,
contribution levels are lower than when such announcements are not possible. They also observe
that if decisions are observable, there is a decrease in contributions compared to a benchmark
3
treatment in which actions are not observable (and no pre-play announcements could be made).
Announcement plus Observability yields higher contributions than either Announcement alone or
Observability alone, but no higher than in a baseline treatment where neither Announcement nor
Observability is in effect. Their design allows honesty, the difference between an individual’s
announcement and his contribution, to be measured. This measure of honesty is in the spirit of the
definition proposed by Khalil (2004), who writes “honesty is understood here as telling the truth
and fulfilling contractual obligations even when the benefit from cheating exceeds possible
punishment”. Wilson and Sell find that honesty is rare, with subjects’ announcements being
systematically considerably higher than final contributions, regardless of whether or not the
contribution decisions are observable.
In this paper we report the results of an experiment in which we study the effect of both
pre-play announcements and of post-play observability on contribution levels in the voluntary
contributions mechanism. In a sense, we revisit the experiment of Wilson and Sell (1997). As is
clear from the above discussion, the previous results on the effect of public observability and preplay announcements on contribution levels are mixed. The results of Wilson and Sell suggest that
making decisions public or allowing pre-play communication has a negative effect on contribution
levels, while the results of Duffy and Feltovich (who study a different but related social dilemma to
the one considered here) suggest that each instrument has a positive effect. Furthermore, the
positive effect of unstructured communication on contributions identified in previous studies
suggests that announcement elicitation might have a positive effect, and that the increase in
cooperation induced by public observability coupled with sanctions is consistent with observability
alone having the effect of increasing contribution levels. In our study, we also consider, following
Wilson and Sell (1997), the possibility of a positive synergy between the two instruments. There are
three treatments in our experiment. The first is Announcement (A), in which each agent must make
a public non-binding announcement consisting of his intended contribution level. The second is
Observation (O), in which each individual’s contribution decisions are revealed to all participants.
The third is Announcement plus Observation (A+O), in which both the announcement of treatment
A and the observability of treatment O are in effect. In addition to considering the effects of
observability and announcements on contributions, we explore in some detail the determinants of
announcements, contributions, and honesty.
The treatments, as well as other procedural details of the experiment, are described in more
detail in section 2. The results of the study are presented in section 3. Section 4 contains our
concluding remarks.
4
2. The Experiment
The experiment consisted of seven sessions. In each session, there were 30 periods of
interaction, divided into three segments of 10 periods. All of the sessions were conducted at the
Center for Research in Economics and Management (CREM), at the University Rennes I, Rennes,
France. Between 12 and 20 subjects participated in each session. The subjects were recruited from
undergraduate courses in business and economics at the university. None of the subjects had
participated in an economic experiment previously. No subject participated in more than one
session. On average, a session lasted 100 minutes including initial instruction and payment of
subjects. The experiment was computerized using the Ztree program developed at the University of
Zurich1.
Table 1 contains some summary information about each of the sessions. The first four
columns indicate the session number, the number of subjects that took part in the session, the
number of four-person groups in the session, and the treatment in effect. The fifth through seventh
columns indicate the particular rules in effect in each of the three ten-period segments of the
session.
[Table 1: About Here]
2.1 Procedures Common to All Treatments
A partner matching protocol was in effect for all sessions. The computer network separated
the subjects taking part in a session into groups of size four. Group assignments remained fixed for
the entire session and the members of a group interacted exclusively with their own group members
for the entire session. Individuals received no information about the activity of any groups other
than their own. There were 30 periods of play in each session, consisting of three ten-period
segments. During each ten-period segment, subjects did not know whether or not the experiment
would extend beyond the current segment. However, they knew the segment length and that each
period within the segment would be identical. At the beginning of the experiment, the instructions
were distributed and read to the subjects. There followed a quiz, consisting of four questions
concerning the rules of the game and how earnings were determined, which all subjects were
required to answer. The experimenter then announced and explained the correct responses. Subjects
could indicate whether they had any questions about the process and the experimenter would
answer them in private.
In periods 1-10 and periods 21-30 of each session, subjects played a voluntary contributions
(VCM) game, described in the next paragraph, without announcements and public information
1
See Fischbacher (1999) for a description of the ztree computer program.
5
(except for session 7, in which the VCM without announcements and observation was played in
periods 11-20). Activity in these periods proceeded as follows. At the beginning of each period,
each agent was endowed with 20 Experimental Currency Units (ECU’s), with each ECU
convertible to Euros at 60 ECU = 1 Euro. Subjects simultaneously chose the portion of their
endowment to contribute to the group account. They made this contribution decision by entering the
number of ECU they wished to contribute in an appropriate field on their screens and clicking on
another field to confirm their decision. Each ECU contributed to the group account yielded a payoff
of 0.4 ECU to each of the four members of the group. Each ECU not contributed by the subject was
credited to the subject’s private account.2 Therefore, the earnings, in ECU, of individual i in a
period equaled
4
E = 20 − ci + 0.4∑ c k ,
(1)
k =1
where c i is the contribution of player i . It is easily seen from (1) that individual i’s earnings are
maximized at c i = 0. Therefore, if the game is played once, there is a dominant strategy to
contribute zero. If the game is finitely repeated, the only subgame perfect equilibrium of the game is
for all players to contribute zero in each period.
2.2. Procedures Specific to Particular Treatments
In periods 11-20 of sessions 1 and 2, which constituted the Announcement (A) treatment,
each period consisted of a two-stage game. In the first stage, subjects were required to announce a
hypothetical contribution level. The announcement was non-binding. All group members’
announcements were simultaneous. There was no requirement that an individual’s actual
contribution level correspond in any way to his announcement. The announcement was described in
the following terms (translated from the original French text). “Before each period, each subject,
including you, receives an endowment of 20 ECU. Each of the four members of your group,
including you, decides separately on the amount of his endowment, in the range of 0 to 20 inclusive,
which he announces that he will assign to the project.”
At the beginning of the second stage within each period from 11-20 in the A treatment,
subjects’ computer screens displayed the announcements of each of the other members of their
group. The announcement of each individual was associated with a letter of the alphabet, A,..,D,
which identified the person who made the announcement. In this treatment, individual contributions
2
The same parameters were used in the Fehr and Gaechter (2000a) study, as well as in several subsequent
studies. At the group optimum, each member of the group contributes all 20 ECU, yielding a payoff of 32
ECU per person for the period. If every player follows his dominant strategy, of contributing zero, each player
receives a payoff of 20 ECU.
6
were not displayed at any time, and thus other group members could not associate an individual’s
announcement with her contribution decision.
Activity for the remainder of a period in the A treatment followed exactly the same rules as
periods 1-10 and 21-30. Participants simultaneously chose the portion of their endowment to
contribute to the group account. Subjects were free to contribute less than, more than, or the exact
amount specified in their stage 1 announcement. Specifically, the instructions indicated, “You must
choose your contribution to the project. This amount can be identical to, less than, or more than the
amount that you have announced in the first stage.” At the end of each period, each subject’s
computer displayed his own initial endowment, own contribution, the total group contribution, and
own earnings. The earnings displayed consisted of those for the current period, as well as the
accumulated earnings for the session up to and including the current period. After all subjects
selected a field labeled [OK], the computer program continued to the next period.
Periods 11-20 of the Observation (O) treatment consisted of the same sequence of activity
as in periods 1-10 and 21-30, except for the following difference. At the end of each period, each
subject’s computer screen displayed the contribution of each other group member, in addition to the
individual’s own endowment, contribution, earnings, and the total amount the group contributed in
the period. Periods 11-20 of sessions 5 and 6 of the Announcement plus Observation (A+O)
sessions followed identical rules to periods 11-20 of treatment A, except that under A+O, each
subject was informed of the contribution level of each group member in the current period, as in the
O treatment. Thus during periods 11-20 of the A+O treatment, an individual’s announcement in the
current period could be associated with certainty to his contribution decision for the period.3
In each treatment, the only subgame perfect equilibrium of the game, whether it is played
once or finitely repeated, is for all players to always contribute zero to the public good. Any profile
of announcements in the A and A+O treatments is compatible with a subgame perfect equilibrium.
3. Results
Figure 1a displays the time series of total group contributions by period for each of the
eight groups that participated in the Announcement plus Observation (A+O) treatment, in sessions 5
and 6, in which in periods 11-20 announcements were elicited and decisions were made public.
Figure 1b shows the data for session 7, in which announcement elicitation and observability were in
effect in periods 1-10 and 21-30. The vertical axis indicates the total number of tokens that the
group contributed in the period, where the maximum possible total contribution is 80 (the total
corresponding to a contribution of 20 for each agent). The horizontal axis indicates the period
3
In session 7, activity followed a different sequence. The activity described above for periods 1-10 and 21-30
for sessions 1-6 characterized periods 11-20 of session 7. The description above for periods 11-20 in sessions
5 and 6 applied to periods 1-10 and 21-30 of session 7.
7
number. Each time series represents the activity of one group. Table 2a presents the average
contribution of each group in sessions 5 and 6, indicated as groups 1 – 8, as well as the data from
session seven, indicated as groups 9 – 13. The second column of the table indicates, for each of the
eight groups numbered 1 - 8, the average individual contribution for periods 1-10 and 21-30. The
third column gives the same information for periods 11-20. For groups 9 – 13, the table displays the
data from periods 11-20 in the second column and those from periods 1-10 and 21-30 in the third
column.
For illustrative purposes, figure 2 compares the actual average contribution for sessions 5
and 6 of treatment A+O relative to “hypothetical” data without observation and announcement for
periods 11-20. The hypothetical benchmark data is an interpolation of the data in periods 1-10 and
21-30 of sessions 5 and 6, constructed for each period t in the following manner. The average
contribution of individuals in all groups participating in the two sessions (32 individuals) is
calculated for period t – 10, and the same calculation is performed for period t +10. The two
resulting averages are averaged to yield an interpolated average level of contribution for period t4.
The data from the Announcement plus Observation treatment exhibit an increase in
contributions in the periods in which Announcement and Observation are in effect, and a fall in
contributions when they are no longer in effect. Table 2a indicates that for seven of eight groups
participating in sessions 5 and 6, average contributions are higher when both Announcement and
Observation are present than when they are both absent. The same is also true for four of the five
groups in session seven. Figure 1a illustrates that greater heterogeneity between groups and higher
contribution levels characterize periods 11-20 of sessions 5 and 6, compared to the other periods of
the same sessions. Some groups, in particular groups 2 and 5, exhibit very large increases in
contributions in response to the change in the environment, while group 3 shows very little effect.
Many groups exhibit a restart effect, a tendency for contributions to increase after a session is
restarted (see Andreoni and Miller, 1993) in the first periods of new segments, periods 11 and 21.
Figure 2 shows that in periods 11-20, average observed contributions are greater than in the
hypothetical benchmark data, particularly in the last few periods of the segment. The principal
finding that emerges from the Announcement plus Observation treatment is stated as Result 1.
[Tables 2a – 2c and Figures 1-2: About Here]
4
The time series of contributions that the interpolation generates exhibits two patterns typically associated
with play of the VCM game: a decline in the level of contribution with repetition and the existence of a
"restart” effect (Andreoni and Miller, 1993), under which contributions in the period following the
announcement of an unanticipated extension of play the game are on average greater than in the last period
before the restart.
8
RESULT 1: The addition of both (a) prior non-binding announcements of contribution levels and
(b) public observation of contribution decisions, increases the average contribution level.
Support for Result 1: In sessions 5 and 6, contribution rates are higher in periods 11–20, when
Announcement and Observation are available, than in the pooled data from periods 1-10 and 21-30
for seven of eight groups. A nonparametric Wilcoxon matched pairs test shows that the difference
in median contributions is significant at the p < .05 level. For the test, each group’s activity over the
entire session constitutes a paired observation. One element of the pair is the group’s data from the
period segment(s), in which Announcement and Observation are in effect (periods 11-20 in sessions
5 and 6). The other element of the pair is the data from the periods in which they are absent. Thus
we reject the hypothesis that Announcement plus Observation has no effect on contributions. In
session seven, we also observe that contribution levels are higher under Announcement and
Observation than in their absence for four of five groups. A nonparametric Wilcoxon matched pairs
test shows that this difference in contributions is significant at the p < .1 level. □
The above result differs from that of Wilson and Sell (1997), who found that Observation
and Announcement together did not increase contributions over the benchmark level. Wilson and
Sell also obtained the striking results that Observation alone and Announcement alone decreased
contribution levels. As we indicate in our support of result 2, we fail to replicate these effects.
Rather, we find that observation alone has no significant effect on contributions, and the effect is
positive in sign. The introduction of announcement alone also has a small and insignificant positive
effect on contribution levels. Both effects are positive in sign, indicating that gathering more
observations yielding similar outcomes would not yield a significantly negative effect on
contributions, as Wilson and Sell have observed. These observations are summarized and supported
in result 2.
RESULT 2: Announcement alone does not change the average contribution level significantly.
Similarly, Observation alone does not change the average contribution level significantly.
Support for Result 2: Figures 3 and 4 display the time series of total contributions by period for
each group in the A and the O treatments. Tables 2b and 2c display the average contribution levels
for the A and O treatments in the same format as table 2a. For the A treatment, a nonparametric
Wilcoxon matched pairs test of the hypothesis that median contributions are identical when
announcements are required and when they are not, indicates that median contributions are not
significantly different between periods 11–20, when announcements were required, and the pooled
9
data from periods 1-10 and 21-30 when no announcements were required (p =0.1386). In the same
manner, for the O treatment, median contributions were not significantly different between periods
11–20, when contributions were observed and the pooled data from periods 1-10 and 21-30 when
they were unobservable (p = 0.2604). □
[Figures 3 and 4: About Here]
It appears that the elicitation of announcements has a negative effect on contributions for
groups 2 and 3 only, in which contributions were already the lowest among all groups in periods 1 –
10. It has a non-negative effect for all of the other groups. Thus it may be the case that eliciting
announcements serves to lower contributions in groups that are particularly disposed to free riding
and increases contributions otherwise, but on average does not yield a significant effect. Results 1
and 2 are consistent with an interaction effect between Announcement and Observation that serves
to promote increased contributions. However, result 3 shows that any interaction effect is not
significant. Requiring individuals to announce a priori their intended contribution levels has a
positive but insignificant marginal effect when their contribution decisions are made public and also
when they are not. Similarly, observation of individuals’ decisions also has a small and insignificant
positive marginal effect in increasing contributions when the individuals are required to announce
an intended contribution, as well as when they are not permitted to do so. However, the sum of the
two small effects is strong enough to yield a significantly positive effect on contribution levels
when both Announcement and Observation are in effect.
RESULT 3: There is no evidence of an interaction effect between Observation and Announcement
that increases contributions. Treatment A+O does not yield significantly higher median group
contributions than treatments A or O.
Support for Result 3: A Mann-Whitney rank sum test of the null hypothesis that there is no
difference in median contribution between periods 11-20 of treatment A+O (in sessions 5 and 6
only) and the same periods in treatment O, treating the average contribution of each group over the
ten periods as an observation, yields a z-score of –1.301 (p = 0.19). A similar test of the difference
in median contribution level between the A+O and A treatments is also insignificant at conventional
levels (z = 0.289, p = 0.772). □
Thus, the only significant difference we detect is an increase in contributions in the A+O
treatment when both Announcement and Observation are introduced. The increase does not occur
under A or O separately, indicating that neither has a significant direct effect. There is no significant
10
difference between A and A+O or between O and A+O, and the absence of these effects reveals a
lack of a strong synergy between the two instruments5.
To study the decision-making behavior of individuals, we explore how their choices of
contributions, announcements, and honesty levels, are updated from one period to the next. Our
observations regarding contribution level are described as result 4 below.
[Tables 3a – 3c: About Here]
RESULT 4: An individual’s contribution in period t, in the A, O, and A+O treatments, is higher (a)
the more he contributed in period t-1, and (b) the more the other members of the group contributed
in period t-1. In the A and A+O treatments, an individual’s contribution in period t is higher, (a)
the higher his own announcement in period t, and (b) the higher the average announcement of
others in period t.
Support for Result 4: Table 3a contains the estimates from the following regression model for the
A+O and A treatments:
( )
( )
( )
cit = β0 + β1 cit −1 + β2 ct−−i1 + β3 at−i + β4 (ati ) + β5t
(2)
For the O treatment, it also contains estimates of the equation:
( )
( )
cit = β0 + β1 cit −1 + β2 ct−−i1 + β5t
(3)
The variables c i t and ati denote person i’s contribution and announcement respectively in
period t, ct−−1i the average contribution of the members of the group other than i in period t – 1, and
at−i the average announcement of these other members of the group in period t. In all relevant
equations, the estimates for β 1 , β 2 β 3 and β 4 are significantly positive. □
Thus, contributions exhibit some inertia in that individuals who make high contributions in
one period are more likely than other agents to do so in the next period. Furthermore, high
5
It is also the case that A and O yield levels of cooperation that are not different from each other. A rank-sum
test of the hypothesis that median contributions are equal in periods 11-20 of the two treatments yields a zscore of .088, and a p value of .465.
11
contributions on the part of other group members appear to be imitated or reciprocated with high
contributions. Both own announcement and the average announcement of others in the current
period positively affect the level of contribution. The positive relationship between own
announcement and own contribution indicates that announcements are not pure noise, but
informative, though imperfect, indicators of subsequent contributions. There is at least some degree
of honesty in announcements in that on average an individual’s contributions is higher, the higher
his prior announcement. High announcements on the part of others in the current period are
reciprocated with higher contributions, holding all else equal. This pattern shows, at least if the
effect on behavior in future periods is ignored, that biasing one’s announcement upward relative to
one’s subsequent contribution yields an advantage on average, because it does induce others to
contribute more.
We next explore possible influences on announcement decisions, and we observe the
patterns described in result 5.
RESULT 5: An individual’s announcement in period t in the A+O and the A treatments is
higher, (a) the higher the individual’s announcement in period t-1, (b) the higher the
announcements of other group members in period t-1, and (c) the more that i contributed in
period t-1 (this last result is significant only in the A+O treatment).
Support for Result 5: Table 3b contains the estimates for the equation:
( )
( ) + β (c
−i
ait = β0 + β1 ati−1 + β2 a t −1
3
i
t −1
) + β4 t
(4)
for the A and the A+O treatments. The signs of the coefficients β1 β 2 β 3 are positive and significant
(except for β 3 in the A treatment). □
Announcements have similar properties as contributions. There appear to be individuals
who make systematically higher announcements, as the β1 term indicates that there is a correlation
in individuals’ announcements from period to period. Furthermore, as the positive sign of β 2
reveals, because announcements are higher, the higher others’ announcements have been, there
appears to be a reciprocal aspect to announcements. Announcements are higher for those who are
high contributors, suggesting that honesty, the difference between announcements and
contributions, may follow specific patterns. Two such patterns of honesty are summarized in result
6.
12
RESULT 6: An individual is more honest in period t, (a) the more honest he was period t-1, and
(b) the more honest others were in period t-1.
Table 3c contains the estimates from the following regression model:
−i
−i
−i
cti − ati = β 0 + β1 (c t −1 − a t −1 ) + β 2 (cti−1 − ati−1 ) + β3 (c t −1 ) + β4t
(5)
For both the A+O and the A treatments, β1 and β2 are positive and significant, while β3 is
insignificant. □
The regression supporting result 6 indicates that honesty is in part an endogenous
phenomenon. The significance of β2 suggests that honesty is subject to reciprocity, as are
announcements and contributions. Honesty on the part of others is repaid with a higher level of
honesty. However, the sign of β2 indicates that those who were honest previously are more likely to
be honest in the current period, all else equal. This suggests that there may also be an intrinsic
component of honesty for individuals, which is in part independent of the behavior of others.
Because player i is no more honest when others have contributed more unless they have also
announced more, as the lack of significance of β3 illustrates, the greater honesty associated with
higher contributions of others is a reciprocation for the greater honesty of others rather than for the
high contributions themselves.
Figure 5 illustrates the fact that high contributors tend to be more honest than free riders.
The figure shows the honesty level in relation to the contribution level. Each bar illustrates the
average honesty level of those who contributed the quantity shown on the horizontal axis. For every
average contribution level that is 14 or less in either the A or the A+O treatment, it is on average
lower than the announcement. For any average contribution level greater than or equal to 16 in
either treatment, the contribution exceeds the average announcement, indicating a positive
correlation between own contribution and own honesty levels.
[Figures 5 - 6: About Here]
Figure 5 also shows that for 16 of the 21 possible contribution levels, the announcement
was higher in A than for A+O. This suggests that honesty was greater when contributions were
observable in A+O than when they were not in A. On average, individuals are more honest in the
A+O treatment than in the A treatment. Figure 6 further illustrates the point. It shows the difference
13
between contribution and announcement over time in the two treatments. The vertical axis of the
figure shows the total group contribution (the maximum possible level is 80). In each of the ten
periods the difference between the average announcement and average contribution is greater in A
than in A+O. Thus, individuals are on average more honest when their contributions can be
observed.
4. Summary
Our principal findings are the following. We find that the joint presence of pre-play
announcements and post-play observation of decisions increases contribution levels significantly.
However, observation or announcement alone does not induce a significant increase in the average
contribution level. Individuals make higher contributions, the higher their own announcements, the
higher the announcements of others, and the more they and others have contributed previously.
Individuals’ announcements are higher, the higher the preceding announcements of other group
members have been, and the more others have previously contributed. Honesty is greater, the higher
one’s own honestly level has been previously, and the higher the honesty level that others have
shown previously. Cooperators tend to be more honest than free riders, and individuals are more
honest when their contribution decisions can be observed than when they cannot. Like
contributions, announcement and honesty levels are endogenous, and appear to reflect in part the
reciprocation of the behavior of others.
Our results do not replicate Sell and Wilson (1997) who report that Observation, coupled
with Announcement, decreases contributions. Several factors might explain the discrepancies
between their study and ours. There are some differences in experimental design. First, some
parameters of the payoff functions (the initial endowment, the marginal per-capita return on
contributions to the public good, and the number of members in a group) are not the same in the two
studies, and it is possible that the parametric structure interacts with the announcement and
observability requirements in a complicated manner. Second, in contrast to Sell and Wilson (1997),
participants in our study were not given any information about other group members' individual
contributions in past periods. It is possible that this information about past behavior may reduce
contributions if it is made more obvious that past contributions of other group members are
declining. Indeed, we do observe in our data that for groups in which contributions are already low,
Announcement further reduces them.
The increase in contributions resulting from the existence of pre-play announcements and
post-play observation might arise because additional sources of emotional cost resulting from
opportunistic behavior are created, and behavior adapts in an attempt to avoid or to reduce these
costs. To help identify the sources of these costs, we distinguish, following Kandel and Lazear
14
(1992), between two types of emotional cost. The first is external in origin, and arises from the
disapproval by other agents of one’s perceived opportunistic behavior. We refer to this type of cost
as shame. The second type, which arises internally within an individual after behaving
opportunistically, is referred to as guilt. Shame can be thought of as arising from opportunistic
actions that others can observe, while guilt originates from opportunistic actions that are
unobservable to others. Gintis (2004, p. 63) has recently argued, from an evolutionary perspective,
that “The experience of shame, guilt and other visceral reactions plays a central role in sustaining
cooperative relations”. Several recent experimental studies have also supported the notion that guilt
and shame influence decision making (see for example Bowles and Gintis (2002) or Charness and
Dufwenberg (2001) for a discussion).
Announcement elicitation and public observability may create additional potential sources
of guilt and shame that do not exist in a baseline treatment with no announcements or observability
of decisions. In a baseline treatment, contributions that are too low relative to the average may be a
source of guilt, but the unobservability of contribution decisions eliminates any source of shame.
Under the announcement treatment, the submission of a contribution that is lower than one’s
announcement is an additional possible source of guilt. Announcement also allows for a source of
shame, the public association to an announcement that is viewed as too low, perhaps because it is
below the group average. The observability treatment admits an additional source of shame, the
association of an individual with a low contribution. In the A+O treatment, three sources of shame
arise that are absent in the baseline treatment: (a) from making a low contribution, (b) from making
a low announcement, (c) from a discrepancy between an individual’s announcement and his
contribution level. Thus the greater levels of contribution in the A+O treatment relative to baseline
levels may reflect the tendency to avoid the cumulative costs of shame.
Avoidance of shame is consistent with the greater level of honesty on the part of individuals
when their announcements can be verified as in the A+O treatment, than when they cannot as in the
A treatment. Thus, while Walker (2004) proposes the following definition, “honesty is the pursuit
and reinforcement of self-integrity and is therefore the pursuit of self-worth”, suggesting that
honesty is a consequence of internal forces, it appears that social pressure may also be important in
encouraging honest behavior, at least in the setting that we study here. While dishonesty,
announcements that exceed actual contributions, is widely observed, we find that the level of
dishonesty is endogenous, depending on the history of activity earlier in the session. As Majeski
and Fricks (1995) claim, "cooperation increases depending on whether promises are kept or not".
This conditionality of honesty has been formalized by Alger and Renault (2002), who distinguish
between unconditional honesty, which depends on an individual’s ethics, and conditional honesty,
which depends on the fairness of the contracts the individual has agreed to. In our experiment,
honesty appears to have components of each type.
15
Our measurement of contributions, announcements, and honesty suggests that reciprocal
behavior is widespread and multi-dimensional in human interaction. In a similar manner as has been
previously documented for contributions (see for example Fehr and Gaechter, 2000b), we find that
high announcements lead other group members to make higher announcements, and greater honesty
leads other group members to be more honest. However, the absence of greater honesty in response
to higher contributions suggests that the reciprocity may be specific rather than general in nature,
perhaps reflecting a degree of specific tit-for-tat behavior, and not necessarily indicative of greater
benevolence to those who have made higher contributions in the past. For example, in our data
honesty is rewarded with honesty, but not necessarily with a general tendency to be more
benevolent toward the honest person. However, we recognize that our experiment was not designed
to isolate the determinants of honesty and a more focused investigation of the behaviors that
increase or decrease honesty in human interaction in social dilemmas is an important potential area
for research.
References
Alger, I. and Renault R. 2002. Screening Ethics When Honest Agents Care About Fairness.
Working Paper. Economics Department. Boston College.
Anderson C. and L. Putterman. 2003. Do Non-Strategic Sanctions Obey the Law of Demand? The
Demand for Punishment in the Voluntary Contributions Mechanism”. Working Paper.
Univerity of Rhode Island.
Andreoni J. and Miller J. 1993. Rational Cooperation in the Finitely Repeated Prisoner’s Dilemma:
Experimental Evidence. Economic Journal. 103: 570-585.
Bowles, S. and H. Gintis. 2002. Prosocial Emotions. Working Paper. Santa Fe Institute.
Carpenter. 2002. Punishing Free Riders: How Group Size Affects Mutual Monitoring and the
Provision of Public Goods. Games and Economic Behavior, forthcoming.
Charness G. and M. Dufwenberg. Promises and Partnership. Working Paper. University of
California at Santa Barbara.
Duffy, J., and Felkovitch N. 2001. Words, Deeds and Lies. Working paper, University of Pittsburgh
and University of Houston.
Duffy, J., and Felkovitch N. 2002. Do Actions Speak Louder than Words? An Experimental
Comparison of Observation and Cheap Talk, Games and Economic Behavior, 39, 1-27.
Fehr, E., and S. Gaechter. 2000a. Cooperation and Punishment in Public Goods Experiments.
American Economic Review, 90(4): 980-994.
Fehr E. and S. Gaechter. 2000b. Fairness and Retaliation: The Economics of Reciprocity. Journal of
Economic Perspectives 14, 159-191.
Gintis, H. 2004. The Genetic Side of Gene-Culture Coevolution: Internalization of Norms and
Prosocial Emotions. Journal of Economic Behavior and Organization, 53, 57-67.
Isaac, M., and J. Walker. 1988a. Communication and Free-Riding Behavior: The Voluntary
Contributions Mechanism. Economic Inquiry 26(4):585-608.
_______. 1988b. Group Size Effects in Public Goods Provision: The Voluntary Contributions
Mechanism. Quarterly Journal of Economics 103:179-99.
Kandel. E and E. Lazear 1992. Peer pressure and partnership. Journal of Political Economy
100:801-817.
Khalil, E. L. 2004. What is Altruism? Journal of Economic Psychology. 25. 97-123
16
Ledyard, J. 1995. Public Goods: A Survey of Experimental Research, in: J. Kagel and R. Roth, eds.
Handbook Of Experimental Economics, Princeton University Press, Princeton, NJ.
Majeski, S. J and S. Fricks. 1995. Conflict and Cooperation in International Relations. Journal of
Conflict Resolution 39: 622-45
Ostrom, E., J. Walker, and R. Gardner. 1992. Covenants With and Without a Sword: SelfGovernance is Possible. The American Political Science Review 86(2):404-17.
Rege, M., and K. Telle. 2004. The Impact of Social Approval and Framing on Cooperation in
Public Good Settings, Journal of Public Economics 88(7/8), 1625-1644.
Sell J. and Wilson. R. 1991. Levels of Information and Contribution to Public Goods. Social Forces
70:107-124.
Walker, C. 2004. A Charitable View of Altruism: Commentary on “What is altruism?” by Elias
Khalil. Journal of Economic Psychology. 25. 129-134.
Wilson R. and Sell J. 1997. Liar, Liar…: Reputation and Cheap Talk in Repeated Settings. Journal
of Conflict Resolution.41:695-717.
Yamagishi, T. 1986. The provision of a sanctioning system as a public good. Journal of
Personality and Social Psychology 51(1):110-16.
17
Appendix: Instructions, translated from the original French
version used in the experiment
<<<The instructions below were distributed and read before period 1>>>
GENERAL INSTRUCTIONS
You are participating in an economic experiment in which you can earn some money. Your
earnings depend on your decisions and the decisions of other participants in the experiment. It is
therefore important to read these instructions carefully.
The instructions that have been given to you are your private information. You are not allowed to
communicate with the other participants during the experiment. If you do, you will be
excluded from the session and not be paid your earnings.
Your earnings in the experiment will be in terms of ECU (Experimental Currency Units). Your
earnings will be converted from ECU to Euros and paid in cash at the end of the experimental
session on the following basis:
Your final earnings in ECU are the total of your earnings during each of the periods that
comprise this session.
Your final earnings in ECU will be converted to Euros on the following basis: 60 ECUs are
worth 1 Euro
You will receive, in addition, a participation fee of 3€.
This experimental session is composed of a series of periods. In each period, the
participants are divided in groups of 4. You will thus be grouped with three other people. For the
entire session, you will be grouped with the same three other people. You will not find out the
identity of these people at any time.
Procedures for the next 10 periods
The four subjects comprising a group has the opportunity to participate in a “project”, by
contributing to a group total, which will then be divided among the four individuals. The group total
depends on the amount each individual in the group contributes.
Each period proceeds in the following manner:
At the beginning of each period, each subject, including you, receives an endowment of
20 ECU
Each of the 4 subjects, including you, decides on his own the amount of his endowment
he assigns to the project. After you have chosen your contribution to the project, by
indicating a number between 0 and 20 inclusive, you must click on the [OK] button.
Once this action is performed, you may not change it for the remainder of the current
period.
Once all of the members of your group have made their decisions, your screen will
indicate the total amount of ECU assigned to the project by all of the members of the
18
group together (including your contribution). The screen will indicate to you as well
how much you have earned in the period.
Your earnings are made up of two elements:
- One element is the amount of your endowment you have kept for yourself (that is, 20
ECU minus your contribution to the project).
- The other element is your income from the project: each ECU invested in the project
earns 0.4 ECU to each member of the group, so that the income to you from the project
is 0.4 times the total of the four individual contributions to the project from your group.
- Therefore, your earnings for a period are calculated in the following manner:
Your earnings = (20 – your contribution to the project)
+ 0.4 times (total group contributions to the project)
The earnings of each member of the group are calculated in the same manner, which means that
each group member receives the same income from the total group contribution to the project.
Each ECU of your endowment that you keep for yourself increases your earnings by 1 ECU. Each
ECU that you assign to the project increases your earnings by 0.4 x 1 ECU = .4 ECU. The earnings
of the other group members also increase by 0.4 ECU per person for each ECU you assign to the
project. In the same manner, you receive earnings from each ECU that other members of your group
assign to the project. For each ECU assigned to the project by another member of the group, you
earn 0.4 x 1 ECU = .4 ECU.
If you have any questions about what you have read, please raise your hand. We will respond
individually to your questions right away.
To be sure that you have understood the rules, please answer the following questions:
1) Suppose that each member of your group receives an endowment of 20 ECU. Nobody,
including you, contributes any ECU to the project.
What are your earnings? _________ ECU
What are the earnings of each other group member? ________ ECU
2) Each member of the group receives an endowment of 20 ECU. You contribute 20 ECU
to the project. Each of the three other members of the group contributes 20 ECU to the
project.
What are your earnings? _________ ECU
What are the earnings of each other group member? ________ ECU
19
3) Each member of the group receives an endowment of 20 ECU. The other three
members of the group have assigned a total of 30 ECU to the project
What are your earnings if you contribute 0 ECU to the project? _______ ECU
What are your earnings if you contribute 15 ECU to the project? ________ ECU
4) Each member of the group receives an endowment of 20 ECU. You contribute 8 ECU
to the project.
What are your earnings if the other members of the group contribute a total of 7 ECU to the
project? ___________ ECU
What are your earnings if the other members of the group contribute a total of 22 ECU to
the project? ___________ ECU
20
<The following instructions were distributed and read before period 11>
Procedures for the next ten periods
During the next ten periods, activity will take place in two stages. You will continue to be grouped with the
same group members as in the first ten periods.
During the first stage of each period, you must announce to the other participants how many ECU you
intend to contribute to the project. In the second stage, you decide on your contribution to the project.
The first stage: announcement
Before each period, each subject, including you, receives an endowment of 20 ECU.
Each of the four members of your group, including you, decides separately on the amount
from his endowment, in the range of 0 and 20 inclusive, which he announces that he will
assign to the project. Once you have made your announcement, click on the <OK> button.
This announcement is then communicated to the three other members of your group on
their computer screens. Likewise, you will be informed, on your computer screen, of the
announcement of each of the three other people making up your group.
The second stage: contribution decision
The second stage is a contribution decision
You must choose your contribution, the number of ECUs that you assign to the project.
This amount can be identical to, greater than, or less than the amount that you announced in
the first stage.
After you have made your contribution, you are informed, on your computer screen, of:
•
1. the total amount contributed by the group.
•
2. the contribution that each member of your group announced in the first stage and the actual
contribution that each member of your group chose in the second stage. The computer will calculate
and display the difference between the contribution announcement and the actual contribution for each
member of the group. Each of the other members of your group will receive the same information.
•
Your earnings are calculated in the same way as in the first ten periods of the experiment. Your
earnings for each period are equal to
(20 – your contribution to the project)
+ 0.4 times (total group contribution to the project)
The earnings of each member of the group are calculated in the same manner, which means that each
member of the group receives the same income from group contribution to the project.
< The following instructions were distributed and read before period 21>
Procedures for the next ten periods
The next ten periods will follow the same rules as the first ten periods and the instructions for the first ten
periods will apply. In these periods, you will continue to be grouped with the same subjects as in the
previous twenty periods.
22
Table 1: Characteristics of the Experimental Sessions
Session
Number
Number of
Subjects
1
Treatment
20
Number of
groups
5
2
20
3
4
Rules in effect
Periods 1-10
Periods 11-20
A
VCM
5
A
VCM
12
3
0
VCM
VCM with
announcement
VCM with
announcement
VCM with observation
16
4
0
VCM
A+O
VCM
A+O
VCM
A+O
VCM with
announcement and
observation
5
16
6
16
7
20
4
4
5
23
VCM with observation
VCM with
announcement and
observation
VCM with
announcement and
observation
VCM
Periods 21-30
VCM
VCM
VCM
VCM
VCM
VCM
VCM with
announcement
and
observation
Table 2a. Average Group Contribution Levels (A+O treatment)
G1
G2
G3
G4
G5
G6
G7
G8
Sessions 5 and 6
No Observation or Announcement and
Announcement Observation (periods 11(periods 1-10, 2120)
30)
38.1
65.5
(11.9)
(13.0)
17.7
18.7
(10.2)
(9.3)
27.5
31.1
(13.0)
(10.4)
30.5
43.7
(17.7)
(24.7)
21.0
21.5
(16.9)
(17.3)
16.7
29.8
(14.0)
(21.3)
28.4
30.7
(11.6)
(10.0)
16.5
15.4
(12.4)
(10.2)
Session 7
G9
G10
G11
G12
G13
Average
Std dev
No Observation or Announcement and
Announcement Observation (periods 1(periods 11-20)
10, 21-30)
41.0
41.3
(12.5)
(14.8)
15.2
27.2
(11.1)
(15.4)
7.0
15.1
(6.1)
(9.8)
30.2
53.5
(13.4)
(18.1)
26.1
25.9
(10.9)
(14.8)
24.29
32.26
(12.42)
(14.55)
Note: Numbers in parentheses are standard deviations.
24
Table 2b. Average Group Contribution Levels (A treatment)
G1
G2
G3
G4
G5
G6
G7
G8
G9
Average
Std dev
PG (periods 1-10, PG with announcement
21-30)
(periods 11-20)
14.2
31.0
(10.1)
(9.4)
28.4
32.5
(16.0)
(12.3)
12.3
4.7
(14.7)
(6.7)
11.0
3.2
(10.3)
(5.2)
32.0
32.0
(19.7)
(17.7)
28.0
42.0
(13.5)
(14.7)
24.7
29.6
(11.3)
(11.9)
37.1
45.2
(12.8)
(11.1)
24.3
34.2
(8.1)
23.52
(12.93)
(6.5)
28.26
(10.60)
25
Table 2c. Average Group Contribution Levels (O treatment)
G9
PG (periods 1-10,
21-30)
27.8
(17.1)
23.9
(12.5)
21.8
(14.2)
22.4
(9.43)
12.2
(10.3)
12.7
(12.0)
23.8
(7.0)
12.5
(13.4)
20.9
PG with observation
(periods 11-20)
21.5
(11.1)
28.6
(10.9)
26.2
(16.6)
32.1
(10.1)
9.7
(5.3)
8.4
(7.2)
21.4
(7.8)
27.6
(20.9)
26.2
Average
Std dev
(16.7)
19.8
(12.5)
(10.9)
22.4
(11.2)
G1
G2
G3
G4
G5
G6
G7
G8
26
Table 3a: Contributions as a function of prior contributions and announcements
( )
( )
( )
+ β ( c ) + β ( c ) + β t, for the O treatment
cit = β0 + β1 cit −1 + β2 ct−−i1 + β3 at−i + β4 (ati ) + β5t , for the A+O and A treatments
cit = β0
Constant (β0)
i's contribution (lagged), (β1)
Average contribution of
others (lagged) (β2)
Average announcement of
others (β3)
i's announcement (β4)
Period (β5)
R Squared
Observations
i
1
t −1
2
−i
t −1
5
Dependant variable : i' s contribution in period t
Treatment A+O
Treatment A
0.128
-0.537
(0.891)
(2.223)
0.256***
0.291***
(0.037)
(0.057)
0.312***
0.174**
(0.056)
(0.057)
0.214***
0.335***
(0.062)
(0.083)
0.172***
0.073
(0.037)
(0.056)
-0.122***
-0.084
(0.030)
(0.124)
0.40
0.246
648
324
*** 1% significance level, ** 5% significance level, * 10% significance level, Standard error in parenthesis
27
Treatment O
5.146**
(2.287)
0.298***
(0.049)
0.382***
(0.0801)
-0.247**
(0.121)
0.259
324
Table 3b: The effect of prior announcements and contributions on current announcements
( )
( ) + β (c
−i
ait = β0 + β1 ati−1 + β2 a t −1
3
i
t −1
) + β4 t
Dependant variable : i's announcement in period t
Treatment A+O
Treatment A
Constant (β0)
5.004***
2.484
(.885)
(2.160)
i's announcement (lagged)
.2977***
.2359***
(β1)
(.0410)
(.0566)
Average announcement of
.2329***
.37196***
others (lagged) (β2)
(.059)
(.0823)
i's contribution (lagged)
.113***
.0820
(β3)
(.0384)
(.05180)
Period (β4)
-.0118
.1373
(.0292)
(.118)
R Squared
Observations
0.191
648
0.174
324
*** 1% significance level, ** 5% significance level, * 10% significance level, Standard error in parenthesis
28
Table 3c: The effect of prior honesty and contributions on current honesty
−i
−i
−i
cti − ati = β 0 + β1 (c t −1 − a t −1 ) + β 2 (cti−1 − ati−1 ) + β3 (c t −1 ) + β4t
Dependant variable : i's honesty in period t
Treatment A+O
Treatment A
Constant (β0)
-1.5792
1.1407
(1.094)
(2.887)
Average honesty level of
.1970**
.5321***
others (lagged) (β1)
(.0866)
(.1120)
i 's honesty level (lagged)
.2390***
.20878***
(β2)
(.0406)
(.0561)
Average contribution of
.06821
-.1819
others (lagged) (β3)
(.0700)
(.1126)
-.1164***
-.11535
Period (β4)
(.0400)
(.16006)
R Squared
0.1241
0.1319
Observations
648
324
*** 1% significance level, ** 5% significance level, * 10% significance level, Standard error in parenthesis
29
Figure 1a: Group Contribution Levels in A+O Treatment by Period, Sessions 5 and 6
No Announcement
No Observation
80
Announcement
and Observation
No Announcement
No Observation
70
60
contribution
50
40
30
20
10
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
periods
G5
G6
G7
G8
30
G1
G2
G3
G4
23
24
25
26
27
28
29
30
Figure 1b: Group Contribution Levels in A+O Treatment by Period, Session 7
Announcement and
Observation
No Announcement
No Observation
Announcement and
Observation
80
70
60
contribution
50
40
30
20
10
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
P e rio d
G1
G2
31
G3
G4
G5
22
23
24
25
26
27
28
29
30
Figure 2. Evolution of average contribution in treatment AO relative to hypothetical contribution
average contribution and hypothetical contribution
80
70
60
50
40
30
20
10
0
1
3
5
7
9
11
13
15
17
19
21
period
average contribution
32
hypothetical contribution
23
25
27
29
Figure 3: Group Contribution Levels in Treatment A by Period
No Announcement
No Observation
Announcement
No Observation
No Announcement
No Observation
70
60
Contribution
50
40
30
20
10
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Period
G1
G2
G3
G4
33
G5
G6
G7
G8
G9
24
25
26
27
28
29
30
Figure 4: Group Contribution Levels in Treatment O by Period
70
No Announcement
No Observation
60
No Announcement
Observation
No Announcement
No Observation
Contribution
50
40
30
20
10
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
period
G1
G2
G3
G4
34
G5
G6
G7
G8
G9
24
25
26
27
28
29
30
Figure 5: The Relationship Between Honesty and Current Contribution Level (A and A+O treatments)
6
4
2
16
51
0
-2
73
25
-4
43
82
10
5
9
5
9
52
-6
12
7
5
31
17
12
12
17 7 23
18
25
17
18
15
11
10
Contribution-Announcement
4
3
20
-8
32
-10
27
9
33
10
20
5
-12 166
103
11
-14
0
1
2
3
4
5
6
7
8
9
10
11
Contribution
contribution-announcement A0
35
12
13
14
contribution-announcement A
15
16
17
18
19
20
Figure 6: Evolution of average contribution and announcement over time (A+O and A treatments)
80
average contribution and announcement
70
60
50
40
30
20
10
0
11
12
13
14
15
16
17
18
period
average contribution for A+O
average announcement for A+O
average contribution for A
average announcement for A
36
19
20