Effective social cooperation can emerge even when all individuals act from self-interest and interact only once. This is the conclusion of new research by Andrea Gallice and Ignacio Monzón, published in the July 2019 issue of The Economic Journal, which shows how individuals can be prompted into acting for the public good through so-called ‘position uncertainty’ – even when reputational concerns, often an effective means of motivating socially optimal behaviours, play no role.
In this study, ‘position uncertainty’ describes a situation in which individuals do not have precise knowledge of the place they occupy in the order of interactions. Consider the example of a fundraiser who wants to collect funds for a new public library in town. Several wealthy individuals may contribute to the project, with each contributor eventually benefitting from the project, though they would prefer others to fund it. How can these individuals be encouraged to contribute their fair share?
The authors develop a simple method to convince donors to contribute to the project. The fundraiser should contact donors sequentially but without letting them know the order in which they are contacted, so that the donors face position uncertainty. The fundraiser should also let each donor know the choices of some other donors contacted before.
This works because a donor who does not know their position understands that they may be either early or late in the sequence. If they are early, their choice can influence many subsequent donors. This uncertainty provides an incentive to contribute so as to induce those who follow to do the same.
If donors know their position in the sequence, those placed early may contribute to induce their successors to do the same, while donors who are contacted later would rather free ride on the effort of early contributors. Contribution would thus unravel.
These findings have implications for the sustainability of socially optimal behaviour and for the design of effective fundraising policies.
Co-operation in Social Dilemmas Through Position Uncertainty by Andrea Gallice and Ignacio Monzón is published in the July 2019 issue of The Economic Journal.
Assistant Professor | University of Torino (ESOMAS department)
Junior Chair | Collegio Carlo Alberto