Public goods game
Examples of applications include environmental policy, legal and justice issues and workplace and organisational structures.
In turn, the more a rational individual "reasons for the team" i.e., behave as a component of a profile maximizing the group's objective, the more cooperation is expected.
However, the amount contributed to the pool rarely drops to zero when rounds of the game are iterated, because there tends to remain a hard core of "givers".
During repeated games, players learn their co-players inequality aversion in previous rounds on which future beliefs can be based.
The option to punish non-contributors and to reward the highest contributions after a round of the public goods game has been the issue of many experiments.
[13] Not limited to rewards, the combination of punishment mechanisms and other strategies can also show an effect on directing to cooperation in a promising way.
A public goods games variant suggested as an improvement for researching the free-rider problem is one in which endowment are earned as income.
[18] Researchers have found that in an experiment where an agent's wealth at the end of period t serves as their endowment in t+1, the amounts contributed increase over time even in the absence of punishment strategies.
For example, a public good experiment could be presented as a climate negotiation or as contributions to private parties.
[21] For contribution to be privately "irrational" the tokens in the pot must be multiplied by an amount smaller than the number of players and greater than 1.
One type of public good is a costly, "non-excludable" project that everyone can benefit from, regardless of how much they contribute to create it (because no one can be excluded from using it—like street lighting).
Part of the economic theory of public goods is that they would be under-provided (at a rate lower than the "social optimum") because individuals had no private motive to contribute (the free rider problem).
The "public goods game" is designed to test this belief and connected theories of social behaviour.
Previous studies on public goods games have explored the effect inequality in endowment has on the contributions made by individuals.
The empirical fact that subjects in most societies contribute anything in the simple public goods game is a challenge for game theory to explain via a motive of total self-interest, although it can do better with the "punishment" variant or the "iterated" variant; because some of the motivation to contribute is now purely "rational" if players assume that others may act irrationally and punish them for non-contribution.
Resultant of this incentive, the public goods game may create punishments for individuals who do not contribute effectively.
The sociological interpretation of these results emphasizes group cohesion and cultural norms to explain the "prosocial" outcomes of public goods games.
A study that explored this found that rationality has a statistically significant effect on the public goods game.
[26] As there is a Nash equilibrium established in the linear public goods games, there are opportunities to create a Pareto optimal allocation.
Michael Pickhardt began research into applications of the linear public goods games and their relationship to Pareto optimal allocations.
The conclusions drawn from these findings show the impacts teams have on workplace projects and their ability to meet the overall requirements of their task.
Incentives are fundamental in the public goods game as they provide an opportunity to understand the decisions and actions of the players.
[28] The incentives in the public goods game also offer benefits in understanding the decisions behind an individual choosing to cooperate.
A study exploring the role of social incentives discussed that donations made to charities increase the cooperation between players when in one-shot public goods games.
