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Large-Class Public Goods Experiment

Overview

The professor distributes two cards to each student: one red (heart or diamond) and one black (club or spade). Students play one card in each round, first by (privately) holding the card to their chest and when instructed revealing this card by holding it up facing the instructor at the front of the room. If the student keeps the red card, it earns money only for that person. If the student plays the card (by holding the red card to his or her chest) the card generates earnings for everyone in the group. Thus, playing the red card represents making a contribution to a public good. (Black cards generate no earnings and are used to keep decisions private; when a student plays a card by holding it to his chest, others cannot tell whether the student is playing a red card or not.) After the instructor observes that everyone has made a decision, students are asked to reveal the card they are contributing by holding it up, facing the front of the room. The instructor counts the number of red cards played and announces this total to the class. This process is repeated for several rounds, and then the professor announces a change in the value of red cards kept. After several more contribution rounds, students are given the opportunity to engage in a non-binding communication period before the experiment continues. The topics that students discuss typically form the basis of the subsequent class discussion and lecture.

Student Instructions

(PDF file of instructions for printing)

(These instructions are written assuming that the teacher reads them to students in class, but can easily be modified for reading outside of class prior to the lecture period. They can also be given in writing to students, but many professors simply read them to the students and highlight the key rules on the board. In this case, the students can create their own record sheet on their own paper. Cards can be handed out while instructions are being read.)

This is a simple card game. Each of you will be given 2 cards; one of these cards is red (hearts or diamonds) and one of these cards is black (clubs or spades). The exercise will consist of a number of rounds (you have 15 rounds listed on your record sheet - we will probably complete fewer than 15 rounds). When a round begins I will ask you to decide which ONE of these two cards to play. You will play a card by holding it to your chest, with the color facing toward you so no one else can see what card you played. Your earnings in dollars are determined by what you do with your red card.

In the first several rounds: you will earn $4 if you keep your red card and $0 if you keep your black card. Red cards that are played will affect everyone's earnings in the following manner. I will count up the number of red cards played, and everyone will earn this number of dollars. Black cards played have no effect on the count.

To summarize, your earnings for the period will be calculated as:

Earnings = $4 (if you kept your red card) + $1 x (total number of red cards played)


After several rounds, I will announce a change in the earnings for keeping a red card. Red cards played will always earn $1 for each person. Use the space below to record your decisions, your (hypothetical) earnings, and your cumulative earnings.

Additional Instructions for the Professor

  1. You should conduct several rounds with the earnings specified in the students' instructions ($4 for a red card kept and $1 for each red-card played), until the number of red-cards contributed starts to decline. Typically there is a marked decrease in contributions after three or four rounds. After this, change the value of a red-card kept to $2, while keeping the value of a red-card played fixed at $1. This does not change the Nash equilibrium, but because the opportunity cost of keeping a card declines, one typically observes an increase in contributions as a result of this change. This increase is particularly dramatic since it occurs after contributions had been declining for two or three rounds in the first treatment. After several rounds with this payment structure, announce that you will give students a chance to talk for several minutes. They can talk about anything they like, but tell them that you will not enforce any agreements that they make and that they will not be given another chance to talk with one another before the end of the experiment. Give students up to 5 minutes for discussion, then conduct several more rounds.

  2. If you are running short of time, reduce the number of rounds conducted under the second treatment ($2 for each red card kept) and conduct only one or two rounds after the discussion period. It's best not to skip the discussion period since this is when many students start to figure out the conflict between what is best for the individual and what is best for the group. However, we suggest that you not allow students to talk to one another at any other time during the experiment.

  3. Students typically need some help in filling out their record sheet during the first round or two, so you should lead them through the process. Remind them that they earned $4 if they kept their red card and $0 if they kept their black card; so the column labeled "earnings for cards kept" will be $0 if they kept their black card or $4 if kept their red card. Then announce the earnings that EVERYONE will receive from the red cards played (for example, if 18 red cards were played, announce that everyone should write down $18 in the column labeled "$1 x (total # of red cards played)"). Be sure to remind them that each person will receive this amount, even those who did not play a red card. Then tell them to fill in their total earnings in the period: earnings from cards kept + earnings from cards played.

  4. After each round, you should write on the board the total number of red cards that were played. Be sure to indicate the value of the red card kept for each decision, since you will refer to this and the number of cards contributed during the class discussion.
 
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