Asymmetric heterogeneities and the role of transfers in a public goods experiment

Abstract

Previous experimental research has shown that cooperation is especially challenging in situations involving heterogeneous actors. Here, we investigate the effect of allowing unconditional transfers in a public goods game when actors differ asymmetrically in their endowments and productivity levels. Under this setup, full efficiency, in terms of highest maximum group payoff, can only be achieved with the full transfer of resources from the players with high endowment and low productivity to the players with high productivity but low endowment. We show that, in this setting, the availability of transfers enhances public good provision and cooperation. The voluntary transfer serves as a powerful cooperative signal, leading to high contribution rates among the recipients. However, if the transfer possibility is given but not used, cooperation erodes.