in a Public Goods Game? Experimental Evidence

In finitely repeated laboratory public goods games contributions start at about 40 to 60 percent of the social optimum and decay from over time with increasing free-riding. There is controversy regarding the reasons behind the decay in contributions. We start from the premise that the existence of reciprocal preferences transforms the public goods games into a problem of equilibrium selection with high contributions being an efficient equilibrium and low contributions being an inefficient equilibrium with others in between. We demonstrate that beliefs held by players about the contributions of their peers play a crucial role in determining their own subsequent contributions. We argue that it is social learning about the heterogeneity of types in the population that is the key explanation to the familiar pattern of decay