Competition vs. Cooperation. An Experimental Inquiry.

Dipartimento di Politiche Pubbliche e Scelte Collettive – POLIS
Department of Public Policy and Public Choice – POLIS
Working paper N. 39
December 2003
Competition vs. Cooperation.
An Experimental Inquiry.
Marie-Edith Bissey, Claudia Canegallo, Guido Ortona and Francesco Scacciati
UNIVERSITA’ DEL PIEMONTE ORIENTALE “Amedeo Avogadro”
ALESSANDRIA
1
Competition vs. Cooperation. An Experimental Inquiry.
Marie Edith Bissey*, Claudia Canegallo*, Guido Ortona*§ and Francesco Scacciati**
Abstract. It is argued that the propensity to cooperate may be negatively affected by competition. Experimental evidence
support this hypothesis. In a set of three experiments in which different degrees of competition characterize the markets, participants
reduce their contributions to a public project as the degree of competition increases, from the benchmark case – no competition on
the private market – up to the perfect competition case.
*Department of Public Choice, POLIS, Università del Piemonte Orientale, Via Cavour 84, Alessandria 15100, Italy
** Department of Economics “Cognetti de Martiis”, Università di Torino, Via Po 53, Torino 10124, Italy
§ Corresponding author, guido.ortona@sp.unipmn.it
2
1. Introduction
There is experimental evidence that human beings usually cooperate more than is prescribed
by the maximization of purely selfish utility functions1. To the glory of experimental economics,
this result produced a real and significant shift in mainstream economics: the idea that fairness
and/or altruistic concerns may be present in “normal” preferences is no more heretical, despite the
indeterminacy that it introduces2. Altruism is maintained also if the payoff is high3 and/or learning
is allowed4; hence, many scholars agree that there is something in the human nature that drives
subjects towards cooperation5. The very notion of Human Nature is ill-defined and intriguing; yet a
theory that explains at this level the existence of a propensity to cooperate exists and is quite
consolidated. This theory is not (yet) formalized to the point requested by economics (or
economists) and, mostly, is not fully economic in its essence, hence it is probably safer to refer to it
as to a conjecture. Our paper is downstream with respect to it: should the conjecture prove wrong,
our paper would admittedly lose its validity.
We proceed with a very rough sketch of the theory. It is made of three components. The
first is fully economic: cooperative equilibria in repeated prisoners’ dilemmas are possible. We refer
not only to the so-called “gang of four” approach6, but mostly to the approach of the theory of
conventions: there is a class of cooperative strategies that not only are Nash equilibria, but also
satisfy the more demanding requirement of non-invadibility7. No need to deal further with these
results, as they are well-known.
The second component of the theory, also well-known and mid-way between economics
and cognitive science, is the assumption that by necessity subjects resort to heuristics based on
analogy in choosing and, more broadly, in reasoning. We will not quote references on this topic, but
one: Henrich et al. (2001) argue, on an impressive cross-cultural comparative basis, that “the degree
of cooperation, sharing, and punishment exhibited by experimental subjects closely corresponds to
templates for these behaviors in the subjects’ daily life; and the substantial variability
in
experimental behaviors across groups is an expression of the large between-group differences in the
structures of social interaction and modes of livelihood”. Actually, their experiments show that selfutility concerns meet great difficulties in displacing "default" behaviors. With reference to this
1
This conclusion is supported by several families of experiments: ultimatum games (introduced by Guth et al., 1982), gift-exchange
games (Fehr et al., 1993), Trust games (Berg et al., 1995), and Public goods games (a survey is Ledyard, 1995).
2
For a discussion, see Fehr and Schmidt, 2000.
3
An interesting real-world experiment is in Pommerehne et al., 1994.
4
See for instance Davis and Holt, 1993, ch. 6. Fehr and Gächter (2000) observe that the cooperation is strongly enhanced if
participants are allowed to punish (at a cost) the free-riders. This is important for our discussion, as we will see in a moment.
5
Probably, the first important study that draws this conclusion from experimental evidence is Caporael et al., 1989.
6
See Kreps et al., 1982.
7
See f.i. Sugden, 1986; Maynard Smith, 1982.
3
point, our conjecture – coherent both with the assumption and the quotation – is consequently that
subjects, in experimental settings, adopt “usual” behaviors;
The third component is sociobiological. The story goes this way:
(a) for some 99% of our history as a species we were gatherers-hunters;
(b) gatherer-hunter societies are a very good environment to nurture cooperative conventions,
both for their efficiency in maximizing individual utility and for the existence of strong family (or
genetic) links;
(c) hence, it is reasonable to conjecture (again!) that we may have developed an instinct
towards cooperation, or at least (to be less demanding) a genetic-based propensity to learn to
cooperate.
Again, we deem it superfluous to give quotations on this argument, but for some recent
evidence that strongly supports it on a biological basis. Rilling et al. (2002) found that in an iterated
prisoners’ dilemma game “mutual cooperation was associated with consistent activation in brain
areas that have been linked with reward processing” (p.395). On the same line, Fehr and Gächter
found that "free riding causes strong negative emotions among cooperators” (1999, quotation from
the abstract). Brosnan and De Waal (2003) showed that also “Monkeys reject unequal pay”, as the
title of their paper reads. Boyd et al. (2003) proved that the punishment of free-riders may evolve
quite easily as an evolutionary stable strategy; this is important, because all the cooperative
conventions that have been analyzed require this feature (see f.i. Axelrod, 1986), at least to our
knowledge. Less recently, psychologists discovered that friendship (a feature that by definition
implies a greater propensity to cooperate) has a biological correlate (see f.i. Rushton, 1989).
To sum up: we have an imprinted tendency to cooperate (third element) that drives our
normal behavior (second) and that has not been selected away because (first) it may correspond to
an equilibrium strategy.
4
2. Cooperation and competition
If things are so, why pre-experimental economics was so prone to admit selfishness (but for
idiosyncratic preferences) as the absolutely dominant determinant of human behavior? According to
Fehr and Schmidt (2000) – and we agree – this was due to an unjustified generalization to the whole
set of human choices of the ones assumed in a competitive market environment.
Actually, there are strong reasons why a (purely) competitive market should produce a
(perfectly) selfish behavior.
First, in equilibrium a non-maximizing subject will give away her/his "normal" profit, and
hence leave the market. In other words, a selfish subject would not miss a gain - s/he would meet a
loss, possibly a total loss, from the reference point. And experimental evidence shows beyond any
doubt the losses are much more aversed than missed gain8.
Second, the atomistic dimension of the subjects makes them irresponsible: it makes little
sense to incur costs to be “fair”, if my fairness has no discernible results. Two basic theoretical
features correspond to this characteristic: the assumption that markets are parametrical and not
strategic in mainstream economics, and the notion of feticism in Marxian economics (subjects are
induced to ignore the human beings that hide beyond prices, wages, etc). Marxian economics
actually provides a conceptual environment quite suitable for our discussion: selfishness is the
attitudinal superstructure that best corresponds to an economy structured as a set of perfectly
competitive markets.
Hence, if we admit that in “real life” not all social (and not even all economic)
environments correspond to perfectly competitive markets, we may expect a low level of
cooperation if the environment is strongly competitive and a high level if it is not9. In this paper, we
report experimental evidence of the existence of a negative correlation between the propensity to
cooperate and the degree of competition.
8
9
The literature is enormous. Among the basic references see f.i. Kahneman and Tversky (1979) and Knetsch and Sinden (1987).
Obviously, the measure of “low” and “high” is difficult to fix; arguably it is affected by a lot of contour conditions.
5
3. The experiment
Agents were endowed with a given sum (18 Euros), to be totally spent in two different
projects (A and B).
Project A is a private good that remunerates (if need be, ex-aequo) only those who invest
the highest amount of money in the project. Project B is a public good that remunerates all
participants equally, irrespective of individual contributions10. Everybody was free to split the 18
Euros among the two projects in the way believed to be the best.
Even though the public good was never produced when a threshold amount was fixed, the
results show that cooperation significantly diminishes as competition increases.
3.1. The method
The experiment was run five times, with different groups of 24 undergraduate students, and
different levels of competition and hence of risk. Four of the five experiments were run in the
Laboratory of Experimental and Simulative Economics of The Università del Piemonte Orientale in
Alessandria, with students from different classes, years and Faculties. One experiment (that of table
1) was run in a computer room of the Università di Torino, with students coming from the same
economics class, who had recently studied the prisoners’ dilemma in an International Economics
course.
3.1.1 The more competitive environment
In the more competitive environment, those who did not win in the private good project lost
all the money invested in that project, whereas the winner (winners, if ex-aequo) – i.e. the one(s)
that put the greatest sum in project A – got all the money collected in that project multiplied by 1.2.
This experiment was run twice, with different rules regarding project B.
In the first experiment the public good was produced only if a threshold amount G of money
(1/4 of the total distributed amount; i.e. 108 out of 432 Euros) was overall invested in the project. In
this case, the sum invested in the public good was multiplied by 1.6 and equally divided among all
participants. If G was not reached, all the money invested in project B was lost.
In the second experiment, G is equal to zero and therefore the public good is always
produced, rewarding the participants as in the first experiment.
6
3.1.2 The less competitive environment
In the less competitive environment, those who did not win in the private good (project A)
got back the money invested in that project, whereas the winner(s) received the money invested plus
a 20% surplus of all the money collected in the project. Project B works as in the first experiment,
with the same G (108 Euros) to be reached in order to produce the public good and remunerate all
participants.
3.1.3 A free-from-competition environment
In the last two experiments we simulated a free-from-competition environment, to be used
as a benchmark for the first three experiments. In project A each participant received exactly what
(s)he invested in that project, multiplied by 1.2: i.e, everybody would win. Project B was again as in
the first experiment, with the same G to be reached to produce the public good. This experiment
was run twice, once in Torino, and once in Alessandria, in order to double-check the benchmark
results.
3.1.4 Additional remarks
This experimental structure allows the following patterns:
a) In the more competitive environment, not winning in the private good means losing all
the money invested (i.e., “in real life”, exit from the market). Investing in the private good, on the
other hand, is more profitable for the winner (winners, if ex-aequo), because the jack-pot is formed
with all the money invested in the project by all participants, multiplied by 1.2.
b) In the less competitive environment, not winning is “just” a missed gain. Losers, in fact,
receive the money they invested in project A back, while the winner gets his money back, plus the
surplus of the project (i.e. 20% of all the money collected in the project).
c) In the benchmark environment competition disappears from project A, but the public
good still needs large participation to be reached. No matter how much one invests in the private
good, the money is never lost, and it yields a fixed 20%.
d) A positive value of G makes cooperation (i.e. investing in the public good) more risky.
This is especially true in the more competitive environment, where it is possible for some
participants to end up with zero gain. Investing in the public good, in fact, increases the probability
of being a loser in the private competition: this, as we have seen, in the more competitive
environment means losing all the money invested in the private good. Moreover, if the public good
is not produced, the participants will lose the money invested in project B. In the less competitive
environment, investing in the public good again diminishes the probability of winning in the private
10
Note that B is not a pure public good, as there is some rivalry in the consumption of it. See below.
7
good, but being a loser means just missing a surplus, because all participants will, nonetheless, get
the money invested in project A back.
All the experiments were made of 8 repetitions, to allow for learning and interaction.
Participants knew that the only repetition to be paid for real was the last one, but they did not know
whether the repetition under play was the last until the end of it. Hence every repetition had a
significant probability of being played for real(see appendix B for details). Obviously, the usual
requirements of anonymity, equality of framing, etc. were rigorously observed.
3.2. The experimental model
Given:
N= number of participants
e = individual endowment, e = yi + gi
yi = private good investment of player “i”, 0≤yi≤ e
gi = public good investment of player “i”, 0≤ gi≤ e
Mp = private sector jackpot
λ = return on private investment, λ≥1
α = global return on public investment, α>λ
α/N= individual return on public investment11, α/N<λ
Nv = number of winners in the private sector
If y1= y2… = ym > yj, jm+1N, then Nv = m
G = overall collection in the public sector: G = (∑i=1N gi)
β =fraction of global endowment necessary to produce the public good, 0≤β<1
MG =public sector jackpot, if G≥β(eN), MG=αG
pi = private pay-off of player “i”
Pi = public pay-off of player “i”
πi =total pay-off of player “i”, πi = pi + Pi
11
This condition is required to make free-riding individually preferable.
8
The pay-off equation for the public good is:
If G≥β(eN), the public good is produced,
Pi = MG/N = α (∑i=1N gi)/N.
If G<β(eN), the public good is not produced,
Pi = 0.
For the private good, we have two slightly different payoff equations, according to the level
of competition simulated. In the more competitive environment, winners take all and losers take
nothing:
Mp = λ (∑i=1N yi)
If yi > yj, then player “i” is a winner, and his private pay-off is given by:
pi = Mp/Nv = λ (∑i=1N yi)/Nv.
If yi < yj, then player “i” is a loser, and his private pay-off is:
pi = 0.
In the less competitive environment, winners get their investment plus the 20% surplus of all
the money invested in the project, while losers only get their investment back:
Mp =(λ-1) (∑i=1N yi)
If yi > yj, then player “i” is a winner, and his private pay-off is given by:
pi = yi + Mp/Nv = yi + (λ-1) (∑i=1N yi)/Nv.
If yi < yj, then player “i” is a loser, and his private pay-off is:
pi = yi.
The values of parameters λ, α and β are λ=1.2, α=1.6 and β=0.25 (or β=0 when there is no
threshold amount and therefore the public good is always produced, regardless of the amount of
money collected in the project).
3.3. Results
The results show that cooperation significantly diminishes as competition increases.
a) The public good was never produced in presence of competition, whereas it was produced
twice (see table 1) and three times (see table 2) in the benchmark environment, where there was no
competition on the private good.
9
b) Both the overall sum invested in the public good and the number of public investors are
significantly higher when there is no competition on the private good (compare figures shown in
tables 1 and 2 to the ones presented in tables 3 and 4).
c) Comparing table 3 and table 4, we see that the sum collected in project B is significantly
lower when competition is high (with a positive G). In the more competitive environment (table 4)
all agents converge to a selfish strategy two rounds before the end of the game, whereas in the less
competitive environment (see table 3) there is never a complete convergence to pure selfishness.
Moreover, the number of participants investing in the public good is 2.56 times higher in the less
than in the more competitive environment, and the amount of money invested is 1.73 times as
much.
d) Comparing tables 2 (or 1), 3 and 4, we see that the contribution to the public good
decreases as competition increases. See also figures 1 and 2.
e) In the experiment presented in table 5 – where there is high competition with no threshold
amount to produce the public good (i.e. G = 0) – the average number of participants investing in the
public good is not significantly different from the more competitive environment, where G=108
(while the average invested sum is). This means that the risk in investing in project B has only a
minor effect, if any, on promoting cooperation, if the risk of a sub-optimal behavior with reference
to the private good is high. To our opinion, this result deserves a deeper inquiry.
f) Finally, an ancillary result: the figures of benchmark sessions are significantly different,
albeit both are in line with previous research. Alessandria and Torino are both in Piedmont, with no
relevant ethnic, cultural and/or economic differences12. This suggests that local, "cultural" factors,
and/or the exposure to the theory, may affect the behavior (or the preferences) more than is often
assumed by experimentalists.
12
The only difference is demographic: the population of Torino is approximately 890,000, that of Alessandria one tenth of that.
10
4. Conclusions and suggestions for further research
An increasing amount of experimental research shows that the framing of choices as market
choices reduces the “regard for other people's well-being” (Carpenter, 2002, p.16)13. We analyzed a
specific component of the market – i.e. competition – and our experiments support the hypothesis
that in a non-competitive environment the propensity to cooperate is present, and that this
propensity is gradually displaced as the degree of competition grows. The experimental evidence
we obtained confirms core economics in what concerns our preferences in a competitive
environment; it goes against its generalization to the human nature, however defined.
However, this is only the start of the story. Competition has a number of constituent
features: do they determine the decrease or the disappearance of propensity to cooperate all
together, or only some of them contribute? Or, more plausibly, are some of them more relevant in
doing so?
There are five aspects of competition
that may have a specific role in reducing the
propensity to cooperate. We may label them payoff, loss, learning, risk and ethics.
a) The payoffs are significant;
b) Non-optimizers are excluded from the market; hence they (typically) face a loss from their
status quo and not only a missed gain;
c) Interactions are repeated, hence learning is possible;
d) The risk increases (presumably) with the degree of competition;
e) The selfish behavior promoted by competition may be constrained and restrained by moral
concerns14.
A lot of experiments already assessed the role of payoff and of learning. Broadly speaking,
the evidence shows that payoff is quite ineffective in reducing cooperation, whereas learning is
effective15. But payoff and learning are not unique to competitive economies: actually, they are
present in every real-world economic environment, except very weird ones. Also, it may be of
interest to test whether risk has the same effect if it is due to competition or to something else; but
risk too is not specific to the competitive environment.
13
See also Loewenstein et al., 1989, Hoffman et al., 1994.
This last feature requires some additional explanation. A "pure" competitor is squeezed on her/his minimum profit; s/he has no
room to sacrifice some of her/his utility to help someone else, i.e. to be altruistic. Hence the probability of being judged negatively is
much higher for her/him than for (for instance) a rentier, whose more-than-normal gains may be allocated in a much more liberal
way. That the Scrooges of capitalism killed the Galahads of the good old times is a popular topic. Unfortunately, to pursue further
this argument is clearly beyond the scope of this paper.
15
Actually, it is not yet clear whether learning reduces cooperation because the subjects gain a better knowledge of the case or
because they refuse to be exploited by free riders. The relevance of punishment, as well as the persistence of cooperation across
repetitions in games different from public goods games, suggest that the second explanation may be more relevant. Further evidence
should help. For a brief discussion see Fehr and Schmidt, 2000, p.8.
14
11
Hence, we suggest that the next step in the assessment of the role of competition in reducing
cooperation is the evaluation of the specific role of loss and ethics. Further experiments will be
devoted to this.
12
Appendix A – Results
Tab. 1 Benchmark environment, Torino, G=108
period
Public contribution
1
2
3
4
5
6
7
8
Number of public contributors
127
111
88
102
59
32
40
4
563
70.375
Total
Average
20
19
19
16
14
10
5
2
105
13.125
Tab. 2 Benchmark environment, Alessandria, G=108
Period
Public contribution
1
2
3
4
5
6
7
8
Total
Average
Number of public contributors
185
164
122
93
72
59
34
31
760
95
23
23
22
21
16
15
12
9
141
17.625
Tab. 3 Less competitive environment, G=108
period
Public contribution
1
2
3
4
5
6
7
8
Total
Average
Number of public contributors
38
37
35
29
25
31
12
25
232
29
9
6
7
4
4
4
3
4
41
5.125
13
Tab. 4 More competitive environment, G=108
period
Public contribution
1
2
3
4
5
6
7
8
Number of public contributors
20
28
42
20
12
12
0
0
134
16.750
Total
Average
5
4
3
2
1
1
0
0
16
2
Tab. 5 More competitive environment, G=0
period
1
2
3
4
5
6
7
8
Total
Average
Public contribution Number of public contributors
67
5
20
2
24
4
34
3
0
0
0
0
18
1
36
2
199
17
24.875
2.125
Fig. 1 Average public contribution in the three relevant environments
Average public contribution
100
80
60
40
20
0
Average public contribution
Benchmark Alessandria
Less competitive
environment
Competitive
environment G=108
95
29
16,75
14
Fig. 2 Average number of contributors in the three relevant environments
Average number of contributors
20
15
10
5
0
Average number of
contributors
Benchmark
Alessandria
Less competitive
environment
Competitive
environment G=108
17,625
5,125
2
Fig. 3 Overall public contribution
Overall public contribution
200
Competitive, G=108
Euro
150
Non competitive,
G=108
100
Competitive, G=0
50
Benchmark
Alessandria, G=108
0
1
2
3
4
5
6
7
8
Period
15
Benchmark Turin,
G=108
Fig. 4 Overall private contribution
Overall private contribution
450
Competitive, G=108
Euro
400
350
Non competitive,
G=108
300
Competitive, G=0
250
Benchmark
Alessandria, G=108
200
1
2
3
4
5
6
7
8
Benchmark Turin,
G=108
Period
Values of T for mean differences (All values are significant at 99%, but 0.17 (not significant
at any reasonable level) and 2.06 (significant at 95%).
Contributors to project B
Benchmark, A
Benchmark, T
LCE
CE, G=108
Benchmark, T
3.52
LCE
12.54
7.36
CE, G=108
15.87
10.33
4.33
CE, G=0
15.80
10.25
4.19
0.17
LCE
22.21
15.73
CE, G=108
25.28
19.37
7.05
CE, G=0
21.54
15.45
2.06
3.71
Total sum invested in project B
Benchmark, A
Benchmark, T
LCE
CE, G=108
Benchmark, T
6.71
16
Appendix B – Instructions16
Instructions for the more competitive environment
117. Welcome to the experiment, and thank you for participating. You are only required to
follow the instructions that will appear on your screen. They will also be distributed on paper, and
you are allowed to consult them whenever you like. There are no difficulties, nor tricky questions.
Your answers will be absolutely anonymous. It will not be possible to the experimenters to
match the answers with the person that provided them. During the experiment you will know other
participants’ choices, but these too will be absolutely anonymous. For the success of the
experiment, it is necessary that you do not communicate with each other18.
2. Open the envelope you have on your desk. It contains 18 Euros. This money is yours.
However, you are requested to use it as will be explained in the following screens.During
the experiment you will have the opportunity to increase this sum, but also to lose it, partly or
totally, as a result of your choices. At the end of the experiment, you either will be given an
additional sum resulting from your further earnings, or you will be asked to refund your loss.
3. Before proceeding with the experiment, you will be asked to go through some practice
sessions, to better understand all the implications of the choices you will make during the “real”
experiment. In the practice sessions payments will be fictitious.
The real sessions, that will follow the practice ones, will provide real payments, as will be
explained shortly.
4. In each of the sessions, both practice and real, you will be asked to use the whole sum you
have been given.
This sum must be allocated – in whole Euros – between two different projects (A and B),
according to your free choice. In other words you may chose to allocate from zero to eighteen
Euros in each of the two projects, for a total of eighteen Euros. You are asked to use all your 18
Euros in each of the practice sessions and in each of the real sessions. This means that the game
begins all over again in each session and that the payoffs are not influenced by the results of the
previous ones. However, only one of the real sessions will yield real payments, as will be explained
further on.
The overall sum due to each participant will be calculated as the sum of what will be
obtained from the two projects.
5. Here is the description of the two projects:
PROJECT A. The overall sum allocated in this project by all participants will be increased
by 20%, and the amount (jackpot) thus obtained will be entirely assigned to the participant who
has allocated the highest sum in this project. All other participants will lose all the money they
allocated in this project. If more than one participant will allocate the highest sum ex-aequo, the
jackpot will be equally divided among them.
PROJECT B. The overall sum allocated in this project by all participants will be increased
by 60% to form the jackpot, but only if the total sum allocated is at least equal to 108 euros,
which corresponds to 1/4 of the money altogether distributed (432 Euros).
16
This is a translation; actual instructions were in Italian. We omit the after-the-job screens and the interactive screens.
Numbers refer to screen displays.
18
Participants were sitting in separate box-places, not allowing involuntary communication.
17
17
If the amount of 108 euros will be reached, the jackpot (i. e. the total allocation in the
project increased by 60%) will be divided in equal shares among all participants to the
experiment, whether they contributed to this project or not, and independently from how much
each of them will have contributed with.
If, instead, the amount of 108 Euros will not be reached, the money allocated in this
project will be lost for everyone.
6. Some practice sessions now follow, the same for everyone, so that you can better
understand the rules of the experiment and test your strategies, confronting them with the results
you achieve.
We remind you that in these practice sessions payments are fictitious.
In each session your choice will be matched with that of 23 virtual participants. In the
practice sessions, in fact, the 23 choices you see on your screen are NOT those of the other
participants around you, differently from what will happen in the “real” sessions, when each
participant will produce one of the 24 choices that will, altogether, determine the project outcome.
After each practice session the screen will tell you how much you have earned or lost, and
obviously this will depend on the combination of your choice with the other 23 virtual choices.
7. We are now distributing on paper support the same instructions you have just read on your
computer. You have e few minutes to go through them. We advise you to consult them during the
experiment, whenever you may feel you need to19.
Screen 8 to 15 display the practice sessions.
16. Thanks to the practice sessions, you should now have an idea of which are the possible
outcomes of your choices. Now you have to chose for real.
In each session you have to use your 18 Euros, with the same rules as in the practice
sessions.
Only one of the following sessions will provide real payments, but you will not be informed
in advance whether the session you are about to play is that one.
However, after each session the computer will tell you if the session just run was that the
computer itself has drawn as the “one for real”. If this is the case, the experiment ends; if not, the
experiment will continue with a new sessions, which again might be the “one for real”.
The computer “decides” randomly whether to continue or not after each session. Thus,
before starting a new session, you know that the ones already run were not for real, while the one
starting has a high probability of being the “for real” one.
17. After the session that provides real payments the experiment will end, and you will be
asked to go to the next room to receive your additional payment or to refund your loss.
Participants will be called one at a time, through the number of the computer; therefore no
one will know the results achieved by the other participants, nor other participants’ names.
18. Now the real sessions begin.
(...)
19
Screens 8 to 15 implement the practice sessions.
18
Instructions for the less competitive environment.
The instructions are exactly the same as for experiment 1, but for the first part of point 5,
which reads
PROJECT A. The overall sum allocated in this project by all participants will be increased
by 20%, and the surplus thus obtained – the jackpot (i.e. the 20% of the whole sum allocated in this
project) – will be entirely assigned to the participant who has allocated the highest sum in this
project. If more than one participant will allocate the highest sum ex-aequo, the jackpot will be
equally divided among them.
In addition, the sum allocated in this project will be refunded to all participants.
Instructions for free-from-competition environment.
The instructions are exactly the same as for experiment 1, but for the first part of point 5.,
which reads
PROJECT A. The overall sum allocated in this project by all participants will be increased
by 20%, and the sum thus obtained (i.e. the jackpot) will be entirely and equally divided between
all the participants.
19
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20
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21
Working Papers
The full text of the working papers is downloadable at http://polis.unipmn.it/
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Department of Public Policy and Public Choice “Polis”
The Department develops and encourages research in fields such as:
• theory of individual and collective choice;
• economic approaches to political systems;
• theory of public policy;
• public policy analysis (with reference to environment, health care, work, family, culture,
etc.);
• experiments in economics and the social sciences;
• quantitative methods applied to economics and the social sciences;
• game theory;
• studies on social attitudes and preferences;
• political philosophy and political theory;
• history of political thought.
The Department has regular members and off-site collaborators from other private or public
organizations.
Instructions to Authors
Please ensure that the final version of your manuscript conforms to the requirements listed below:
The manuscript should be typewritten single-faced and double-spaced with wide margins.
Include an abstract of no more than 100 words.
Classify your article according to the Journal of Economic Literature classification system.
Keep footnotes to a minimum and number them consecutively throughout the manuscript with
superscript Arabic numerals. Acknowledgements and information on grants received can be given
in a first footnote (indicated by an asterisk, not included in the consecutive numbering).
Ensure that references to publications appearing in the text are given as follows:
COASE (1992a; 1992b, ch. 4) has also criticized this bias....
and
“...the market has an even more shadowy role than the firm” (COASE 1988, 7).
List the complete references alphabetically as follows:
Periodicals:
KLEIN, B. (1980), “Transaction Cost Determinants of ‘Unfair’ Contractual Arrangements,”
American Economic Review, 70(2), 356-362.
KLEIN, B., R. G. CRAWFORD and A. A. ALCHIAN (1978), “Vertical Integration, Appropriable
Rents, and the Competitive Contracting Process,” Journal of Law and Economics, 21(2), 297-326.
Monographs:
NELSON, R. R. and S. G. WINTER (1982), An Evolutionary Theory of Economic Change, 2nd ed.,
Harvard University Press: Cambridge, MA.
Contributions to collective works:
STIGLITZ, J. E. (1989), “Imperfect Information in the Product Market,” pp. 769-847, in R.
SCHMALENSEE and R. D. WILLIG (eds.), Handbook of Industrial Organization, Vol. I, North
Holland: Amsterdam-London-New York-Tokyo.
Working papers:
WILLIAMSON, O. E. (1993), “Redistribution and Efficiency: The Remediableness Standard,”
Working paper, Center for the Study of Law and Society, University of California, Berkeley.

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