Faculty of Economics and Business Administration Publications Database

One, Two, Many – Insensitivity to Group Size in Games with Concentrated Benefits and Dispersed Costs

Schumacher, Heiner
Kesternich, Iris
Winter, Joachim
ISSN-Print: 0034-6527
Year: 2016
Keywords: Social Preferences; Distribution Games; Concentrated Benefits; Dispersed Costs; Insensitivity; Group Size

We experimentally analyze distributional preferences when a decider chooses the provision of a good that benefits herself or a receiver, and creates costs for a group of payers. The treatment variation is the number of payers. We observe that sub- jects provide the good even if there are many payers so that the costs of provision exceed the benefits by far. This result holds regardless of whether the provision increases the decider’s payoff or not. Intriguingly, it is not only selfish or max- imin types who provide the good. Rather, we show that a substantial fraction of subjects are “insensitive to group size”: they reveal to care about the payoff of all parties, but attach the same weight to small and large groups so that they ignore large provision costs that are dispersed among many payers. Our results have im- portant consequences for the approval of policies with concentrated benefits and large, dispersed cost, as well as the analysis of ethical behavior, medical decision making, and charity donations.