Centre for Decision Research and Experimental Economics

CeDEx Seminar - Joel van der Weele (University of Amsterdam)

A40 Sir Clive Granger
Wednesday 7th March 2018 (14:00-15:00)
Our speaker this week is Joel van der Weele (University of Amsterdam).

Title: Denial and alarmism in collective action problems
Manuel Foerster and Joel van der Weele

We analyze communication about the social returns to investment in a public good. We model two agents who have private information about these returns as well as their own taste for cooperation, or social preferences. Before deciding to contribute or not, each agent submits an unverifiable report about the returns to the other agent. We show that even if the public good benefits both agents, there are incentives to misrepresent information. First, others' willingness to cooperate generates an incentive for "alarmism'', the exaggeration of social returns in order to opportunistically induce more investment. Second, if people also care about being perceived as caring for common welfare, a justification motive arises for low contributors. As a result, equilibrium communication features “denial”  about the returns, depressing contributions. We illustrate the model in the context of institutional inertia and the climate change debate. We test our theory in a laboratory experiment, and find evidence that image concerns lead to underreporting of efficiency in a charitable giving context.

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