Leading by Example? Investment Decisions in a Mixed Sequential-Simultaneous Public Bad Experiment

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Abstract

This paper investigates the effect of having a leader in a laboratory public bad experiment with five subjects in each group.The control treatment is a standard public bad experiment, while in the leader treatments the design is such that in each group the leader decides first on his or her investment in the public bad.After being informed about the leader s decision, the four followers in each group make their investment decision.Two treatments of the leadership game are played with each group.In the same-leader-costs treatment, all subjects are confronted with the same costs, while in the no-leader-costs treatment the leader faces no direct costs of acting socially.It is found that followers invest significantly less in the public bad when there is a leader compared with a situation when there is no leader.Comparing the two treatments, we find, moreover, that the leadership effect is somewhat stronger when leaders face the same costs as followers compared with the situation in which leaders bear no costs.Randomly chosen leaders set an example by investing less than average players in a standard public bad game, and leader investments are lowest when the costs of leading are low.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages28
Volume2003-38
Publication statusPublished - 2003

Publication series

NameCentER Discussion Paper
Volume2003-38

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Investment decision
Experiment
Costs
Follower
Investing

Keywords

  • investment
  • public goods
  • experiment
  • leadership

Cite this

van der Heijden, E. C. M., & Moxnes, E. (2003). Leading by Example? Investment Decisions in a Mixed Sequential-Simultaneous Public Bad Experiment. (CentER Discussion Paper; Vol. 2003-38). Tilburg: Microeconomics.
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van der Heijden, ECM & Moxnes, E 2003 'Leading by Example? Investment Decisions in a Mixed Sequential-Simultaneous Public Bad Experiment' CentER Discussion Paper, vol. 2003-38, Microeconomics, Tilburg.

Leading by Example? Investment Decisions in a Mixed Sequential-Simultaneous Public Bad Experiment. / van der Heijden, E.C.M.; Moxnes, E.

Tilburg : Microeconomics, 2003. (CentER Discussion Paper; Vol. 2003-38).

Research output: Working paperDiscussion paperOther research output

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AB - This paper investigates the effect of having a leader in a laboratory public bad experiment with five subjects in each group.The control treatment is a standard public bad experiment, while in the leader treatments the design is such that in each group the leader decides first on his or her investment in the public bad.After being informed about the leader s decision, the four followers in each group make their investment decision.Two treatments of the leadership game are played with each group.In the same-leader-costs treatment, all subjects are confronted with the same costs, while in the no-leader-costs treatment the leader faces no direct costs of acting socially.It is found that followers invest significantly less in the public bad when there is a leader compared with a situation when there is no leader.Comparing the two treatments, we find, moreover, that the leadership effect is somewhat stronger when leaders face the same costs as followers compared with the situation in which leaders bear no costs.Randomly chosen leaders set an example by investing less than average players in a standard public bad game, and leader investments are lowest when the costs of leading are low.

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