Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 683: Cooperation under risk and ambiguity

Lisa Björk (), Martin Kocher, Peter Martinsson () and Pham Nam Khanh
Additional contact information
Lisa Björk: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Martin Kocher: Department of Economics, LMU Munich, Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany
Peter Martinsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Pham Nam Khanh: School of Economics, Ho Chi Minh City University of Economics, Postal: Ho Chi Minh City, Viet Nam

Abstract: The return from investments in public goods is almost always uncertain, in contrast to the most common setup in the existing empirical literature. We study the impact of natural uncertainty on cooperation in a social dilemma by conducting a public goods experiment in the laboratory in which the marginal return to contributions is either deterministic, risky (known probabilities) or ambiguous (unknown probabilities). Our design allows us to make inferences on dierences in cooperative attitudes, beliefs, and one-shot as well as repeated contributions to the public good under the three regimes. Interestingly, we do not find that natural uncertainty has a significant impact on the inclination to cooperate, neither on the beliefs of others nor on actual contribution decisions. Our results support the generalizability of previous experimental results based on deterministic settings. From a behavioural point of view, it appears that strategic uncertainty overshadows natural uncertainty in social dilemmas.

Keywords: Public good; conditional cooperation; experiment; uncertainty; risk; ambiguity

JEL-codes: C91; D64; D81; H41

54 pages, December 2016

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