The Public Goods Game
Self-interest vs social interest?
The public goods game offers an interesting insight in which if everyone cooperates and contributes, we will be able to achieve an outcome that is beneficial for all. Drawing relations to societal problems such as national defence, global climate change, depletion of natural resources, and even group projects, these fundamental issues require collective cooperation as a whole in order to achieve the best results.
However, based on what we have learnt about game theory and nash equilibrium, the best course of decision as an individual is to not cooperate. As a rational individual, the dominant strategy would be to avoid contributing and to free-ride on the contributions of others since there is an incentive to deviate from cooperating.
Purported by numerous studies and experiments, the general trend showed a decrease in contributions when people who cooperated realised that there were people who chose not to cooperate and benefited more. Eventually, more people would stop contributing and there will be no benefit to it, hence leading to zero contribution in public goods.
How do we then ensure that everyone cooperates so that we can achieve the best results? Markets have a challenging time producing public goods due to free-riders. To overcome the free-rider problem, we can implement measures in which free-riders can be punished with a cost or people who contribute will be further incentivised. A classic example in school would be peer evaluation which we can appraise the efforts and contribution by each member.
It is interesting to observe and learn about collective group decisions through this experiment. An individual in a group who contributes is better than an individual in a group who maximises one’s own self-interests. In the real world, the incentive to free-ride leads to tax fraud, resource exploitation, and pollution which cause significant harm to society.
Understanding human behaviour in the public goods game is crucial when solving these real world problems. In such situations, it is better to cooperate for the greatest good for society rather than prioritising one’s own self-interests.
