Seminar on "Endogenous Rewards Promote Cooperation"

Sustaining cooperation in social dilemmas is a fundamental objective in the social and biological sciences. While providing a punishment option to community members in the public-goods game (PGG) has been shown to effectively promote cooperation, this has some serious disadvantages; these include destruction of a society’s physical resources as well as its overall social capital. A more efficient approach may be to instead employ a reward mechanism. We propose an endogenous reward mechanism that taxes (at the rate of 20%) the gross income of each round’s PGG play and assigns the amount to a fund; each player then decides on how to distribute his or her share of the fund as rewards to other members of the community. Our anonymous mechanism successfully achieves a high level of contribution (about 70%) with budget-balanced (1:1) rewards that require no external funding, an important condition for realistic implementation. Our results are consistent with the higher contribution levels under endogenous rewards being driven by two key components: First, a strategic response to reward formation can help avoid the no-contribution outcome. Second, conditional cooperation plays a crucial role in maintaining high levels of public-goods contributions.

YANG Chunlei is Professor of Nanjing Audit University. Professor Yang had been awarded 2016 Cheung Kong Scholar Distinguished Professor. He has published his work in Journal of Economic Theory, International Economic Review, Games and Economic Behavior, Quantitative Economics, European Economic Review, Experimental Economics, Journal of Economic Behavior and Organization, Public Choice, Economics Letters, etc.