Inequity aversion, mandates, and the provision of threshold public goods

Abstract

Previous research has shown that individuals have preferences for equity that deviate from traditional payoff maximizing economic theory. In this research, we use an adapted model of inequity aversion to predict how inequity induced through mandated contributions influences voluntary contribution behavior in a threshold public goods game. Contrary to the model’s predictions, we find that individuals do not have preferences for equitable outcomes. Rather, we find that individuals tend to have preferences for equitable contributions to the public good among group members, regardless of income inequities within groups. In addition, we find that mandates significantly decrease the voluntary provision of the public good. That is, groups exposed to mandated contributions met the threshold less frequently than groups not exposed to mandated contributions. Thus, suggesting that mandates can have significant and negative impacts on voluntary action. The results of this research illustrate the impacts of mandates on voluntary contribution behavior, as well as the behavioral implications of inequity in the provision of public goods.