The Effects of Group Interaction in a Public Goods Experiment With Two Exchanges

Consumers can often allocate resources to the provision of local public goods and to the provision of global public goods. This paper reports a public goods experiment in which participants allocated tokens to a local exchange with a relatively high marginal payoff and a global exchange with a lower marginal payoff but a higher potential payoff. The experiment consisted of three treatments with varying degree of interaction amongst the members of the local groups. When participants were not allowed to interact they allocated more tokens to the global exchange. This result suggests that individuals care about the potential payoff of the group exchange more than about the marginal payoff of the exchange. When we allowed members of each local group to communicate, they kept almost no tokens for themselves and attempted to coordinate their contributions to the global exchange with members of the other local group.