Doctoral Dissertation Improvement Grant: Public Good Provision with Inter-Group Competition: The Effect of Group Size Asymmetry and Communication

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Intellectual Merit. Public good provision with inter-group competition has important applications in political economics and organizational economics. Examples include election campaigns, rent-seeking contests and patent races. This project uses experimental methods to study competition between two unequal size groups for a monetary prize. The prize is shared by the members of the winning group, regardless of their individual contributions to the groups' success, so the prize constitutes a public good. The economic environment incorporates two levels of conflict: within-group, individuals have an incentive to free ride on other members' costly contributions; and between-group, groups have an incentive to compete for the prize. The research first studies a simple environment in which group members make a binary decision between contributing and not contributing. The project is later extended to a more general and realistic setting in which group members decide how much to contribute rather than simply whether or not to contribute. In both cases, the experimental design examines whether pre-play within-group communication helps to solve the within-group free riding problem. When within-group communication is not allowed, in a Nash equilibrium the small group has reasonable chances to win the prize in spite of its size disadvantage. Once group members can communicate, however, in equilibrium the small group rarely contributes and the large group is usually able to win. This is because groups can better coordinate when communication is allowed, and they are more likely to achieve the optimal collective outcome and avoid free-riding behavior. Content analysis is used to systematically quantify how communication affects the play of the game, which provides an important methodological contribution. Broader Impacts. The research has important implications for practical policy conclusions and prescriptions. For example, it can provide behavioral benchmarks for the potential costs of rent-seeking contests with asymmetric groups, which can provide guidance for election campaign reform. It will also indicate potential gains or costs to innovative activity from allowing research joint ventures. The study is also projected to have a broad impact for teaching, learning, and participation by underrepresented groups. The project will employ over 400 undergraduate student subjects drawn from a large and diversified student population at Purdue University and will provide these students with important exposure to modern research methods. Many of these subjects, drawn from economics and management classes, will be non-science majors.