Public Goods Experiment Teaching Module

Summary: In this experiment, students must decide how to divide their "endowment" of a good between private consumption and a public good. The private consumption provides a benefit (earnings) to only the individual and the public good provides a benefit to each person in the group, even those who do not contribute to the public good. Two versions of this hand-run experiment are provided: one to use in small classes (ranging from 5 to 40 students) and one that will work well in larger classes. Some variations on these basic experiments are also described.

Motivation: This experiment allows students to discover for themselves the tension between self-interest and group-interest in the public good problem. Some students quickly recognize the incentive to free-ride, while others more readily focus on the group-gains associated with contributions. The hand-run version includes time for group-discussion after several rounds of the game have been completed. This allows students to teach one another about the competing interests between groups and individuals, and also demonstrates the difficulty of maintaining high levels of contributions to public goods without an enforcement mechanism.

Concepts Covered:

1. The two defining characteristics of a public good.
2. The tension between individual and group interests in the voluntary provision of public goods.
3. Why the voluntary provision of public goods may lead to inefficient levels of provision.
4. How the public benefit from a public good affects contributions (theoretically and empirically).

Time Required: This experiment can be conducted in one 50-minute class. The experiment takes up to 20 minutes, including reading instructions. The lecture material provides up to 30 minutes of lecture.

Experiments

We offer two non-computerized experiments in this section: one designed for smaller classes and the other for larger classes.

Small Class Experiment

This experiment is largely based upon "Classroom Games: Voluntary Provision of a Public Good" by Charles A. Holt and Susan K. Laury, Journal of Economic Perspectives 11(4), Fall 1997, pages 209-215.

Materials:

1. One deck of cards for every 13 students. Each deck should be ordered by number, with all four suits of a number together (i.e., 2 of hearts, 2 of diamonds, 2 of clubs, 2 of spades, then 3 of hearts, 3 of diamonds, 3 of clubs, 3 of spades, etc.).
2. Written instructions (which include a record-sheet) for your students.

Considerations:

1. This experiment works well in classes with up to 40 students. If you have a larger class you can try the large-class version described below.
2. This experiment works best if you conduct the experiment first, followed by class discussion and lecture.

Small-Class Experiment

Large Class Experiment

Materials:

1. One deck of cards for every 26 students. Each deck should be ordered alternating a red card (heart or diamond) with a black card (club or spade).
2. Written instructions (which include a record-sheet) for your students.

Considerations:

1. This experiment can be conducted with any size class; however if you have fewer than 40 students you might try the small-class version of the experiment.
2. This experiment works best if you conduct the experiment first, followed by class discussion and lecture.

Large-Class Experiment

Experiment Variations

There are a number of variations on this experiment that you can try in class; you may come up with others that are not on this list (and your students may suggest some of their own). You should feel free to substitute any of these for the treatments suggested in the instructions, or conduct additional rounds of the experiment with any of these that you would like to try.

Experiment Variations

Lecture

Once students have participated in the experiment, you should get them involved in the class discussion as much as possible. Participating in the experiment will have given them an opportunity to really think about the public goods problem (though this term has not yet been introduced) and therefore the role of the discussion period should be to help them summarize what they have learned and put it into economic terms.

Lecture