A Zero Cost Incentives Mechanism Against Free-riding: Field Experiments on Italian Local Transportation Systems
Marco Fabbri, PhD candidate and Erasmus Mundus Scholar at the European Doctorate in Law & Economics; Paola Nicola Barbieri, PhD candidate in Economics, University of Bologna; Maria Bigoni, Assistant Professor, Economics, University of Bologna
Previous research suggests that when people face probabilistic decisions, many choose as though they overestimate the value of low probability, high-stakes events. Indeed, Las Vegas is driven by the fact that people from many walks of life are willing to take gambles that on average are unfavorable, and which enable gambling houses to profit from supplying people with opportunities to immerse themselves in such risks.
Now consider the problem of improving the incentives of individuals to contribute to a public good, a facility available in common to all users. A naturally occurring example is the stock of king crab in a common property fishing ground that all fishermen are dipping into to harvest crabs. But there are artificial examples created by public policy. Thus, in Europe public transportation systems are available for all to use such that anyone can board and each is expected to voluntarily pay the fare. Free riders caught not paying are subject to penalty. The system works very imperfectly: there are lots of free-riders, revenue is reduced, and more of the cost of the facility is financed by taxpayers.
Are there better ways? Much research shows that carrots are often better than sticks in prodding people to do what they might otherwise not choose to do.
The hypothesis testing in this proposal is: will people contribute more in total to the public transportation facility if they can buy a lottery ticket when they board, as an alternative to voluntarily paying the fare? In effect, the street car becomes a mini-casino and the profits support the facility cost.
This field experiment will be conducted in Italy with the cooperation of a transportation company. The basic idea has huge potential for application to other common property resource problems, whether naturally or artificially created.