Economic incentives and political inequality in the management of environmental public goods

We study how the allocation of power in a voting procedure affects the regulation and extraction of environmental public goods. In an appropriation game experiment, different endowments induce heterogeneous preferences among the three group members regarding their preferred quota, aimed at increasing social efficiency by restricting aggregate extraction. The players vote by submitting a proposal; one among the submitted proposals is implemented, selected at random, but across treatments, we vary the odds that a type sets the regulation.

Participants vote for their selfishly preferred quota between half and two-thirds of the time. Although setting quotas decreased aggregate extraction by roughly 10%, we do not find differences between treatments. Once quotas are removed, extraction rises back to inefficient levels. Our results suggest that, although participants are reciprocal, they neglect the positive equilibrium effects of a stricter regulation.