Cooperation in and out of markets: An experimental comparison of public good games and markets with externalities

Experimental studies have compared cooperation across different nonmarket social dilemma settings, but the experimental literature has largely overlooked comparing cooperation across market and nonmarket settings. This paper reports the results from an experiment that compares behavior in theoretically equivalent public good games and market games with externalities. Both positive and negative external effects are considered. Results indicate that people tend to be less cooperative in the marketplace relative to the nonmarket setting, whether the external effect is positive or negative. Most striking is the finding that the combination of a positive external effect in a nonmarket setting (i.e., the standard public good game) stands apart from the other market and nonmarket settings.