Leading by example to protect the environment: Do the costs of leading matter?

Environmentalists often urge their home countries to take a leading role in reducing global environmental problems like climate change. A pertinent question is, Will examples set by leading nations influence others to follow suit, and if so, do the costs of leading matter? For instance, will costly domestic reductions have a stronger effect on followers than purchases of cheap emission permits abroad? To investigate these questions, we have conducted two treatments in a public bad experiment in which leaders have different costs of leading. Our findings suggest that higher costs of leading lead to stronger effects of a given leader example. Randomly chosen leaders lead by example and set better examples if it is less costly to do so. Finally, there seems to be a limit to the leader effect and it may decrease over time.