Overcoming Free-Riding in Information Goods: Sanctions or Rewards?
Economic environments involving information goods often suffer from an extensive freeriding problem. For example, social loafing and lurking on content and discussion forums, leeching on file-sharing networks, and pirating of digital goods. Despite the use of interventions, it is not clear what types of interventions result in the best outcomes for all players involved. We conduct a lab experiment using a public goods game to explore the role of rewards and sanctions at both the individual and group levels on mitigating free-riding behavior. The results of the experiment provide interesting insights on the behavior of free-riding and the use of negative and positive incentives to improve total welfare. Interestingly, sanctioning and rewarding individuals has non-obvious consequences. Sanctioning only the worst free-rider in the group results in a significant decrease in free-riding for the worst free-rider and marginal decreases in free-riding for all other group members. Rewarding only the highest contributor in the group results in a significant increase in free-riding for that individual and everyone else in the group. Overall, our research offers significant insights for the design and implementation of interventions and incentive schemes in information goods environments having the free-rider problem.
Poster Number: 14