Normative conflict and the limits of self-governance in heterogeneous populations

Abstract

Mechanisms to overcome social dilemmas provide incentives to maximize efficiency. However, oftensuch as when agents are heterogeneousthere is a trade-off between efficiency and equalitya normative conflictwhich is overlooked. Agents' concerns for equality in such instances can limit the ability of mechanisms to promote efficiency. We provide evidence for this from a public good experiment using a simple mechanism allowing individuals to communicate periodically with other group members and reward them for their actions. We show that, in homogeneous populationswhere there is no conflict between efficiency and equalitythe mechanism permits groups to obtain maximum efficiency. This is not the case in heterogeneous populations despite the fact that individuals could use rewards to resolve the normative conflict. Although almost all heterogeneous groups agree to follow specific contribution rules with positive contributions, most of them either prioritize equality over efficiency or strike a compromise between the two. These findings suggest normative conflict can be difficult to overcome, imposing limits on the ability of heterogeneous populations to reach efficient outcomes through self-governance.

Nonverbal Content and Swift Trust: An Experiment on Digital Communication

“…A large body of experimental research in economics and other social sciences explores the role of communication in various types of economic interactions, such as cooperation, coordination, trust and reciprocity (see, among others, Ostrom et al, 1992;Cooper et al, 1992;Charness, 2000;Duy and Feltovich, 2002;Ellingsen and Johannesson, 2004;Duy and Feltovich, 2006;Bochet and Putterman, 2009;Bracht and Feltovich, 2009;Gangadharan et al, 2017). This body of empirical evidence generally points to the conclusion that communication increases the eciency of interactions (Sally, 1995;Crawford, 1998;Balliet, 2010).…”

Centrality and cooperation in networks

“…additional mechanisms are equally effective. For example, Gangadharan et al (2017) find that communication increases cooperation in both homogeneous and heterogeneous groups, but the positive effect of communication is stronger in homogeneous groups. Finally, not all studies find that heterogeneity is detrimental to efficiency, and not under all circumstances.…”

“…A large body of previous work has found that heterogeneity in endowments, productivity and/or returns frequently reduces cooperation in VCM games (e.g. Cherry et al 2005, Anderson et al 2008, Tan 2008, Nikiforakis et al 2012, Fischbacher et al 2014, Hargreaves Heap et al 2016, Gangadharan et al 2017). 2 This is primarily due to a multiplicity of norms that underlie the behavior of players with different characteristics.…”

Taxation, redistribution, and observability in social dilemmas

“…But mechanisms that work when populations face the same opportunities and derive the same benefits from the collective goods may not be as effective when populations are heterogeneous in that respect. Indeed, the tension between private and social interests can be aggravated in such groups because of increased inequality and the presence of normative conflicts regarding what one ought to do in such circumstances (Gangadharan, Nikiforakis, & Villeval, ; Nikiforakis, Noussair, & Wilkening, ; Reuben & Riedl, ; Weng & Carlsson, ). This raises the question of which policy intervention can be effective in such environments, both with regard to reduced free‐riding and more equal income distribution.…”