 In this section of the course we're talking about the dynamics of cooperation by looking at it through the lens of the social dilemma, which captures much of the core tension within organizations between the individual and the group. As we saw previously, the social dilemma is, as one commentator noted, a situation where each person benefits by consuming the fruits of others' labor and laboring himself as little as possible. But if everyone behaves this way, there will be no fruits to enjoy. The game's theoretical version of the social dilemma is called the public goods game. Public goods games are usually employed to model the behavior of groups of individuals trying to achieve a common goal. The public goods game has the same properties as the prisoner's dilemma game, but describes a public good or a resource from which all may benefit, regardless of whether or not they contribute to that good. One example of this might be storekeepers with shops on the same street. They can collaborate, that is to say, invest some money in improving the street, creating more parking places, better lighting, etc. to result in benefits that will be shared by all the stores, such as more customers circulating in the street. However, some of them can decide not to contribute to the improvements, saving some money while still sharing in part of the added value created by the whole community. Another example of a public goods game could be seen in how people may use a city park regardless of whether they contribute to its upkeep through providing tax payments. Most public goods are collectively shared and are non-excludable. Once they've been provisioned, it is difficult to exclude people from them. As a result, there is a temptation to enjoy the good without making a contribution. Those who do so are called free riders, like taking a free ride on public transport. While it is narrowly rational to free ride, if all do so, the public good is not provided and all are worse off. We can understand the underlining structure here by looking at a basic lab version of the public goods game. In this experiment, people come into the lab and are given 100 tokens each. They are then given a choice of whether they keep their tokens or put them into a common pool. People then put their contributions into the pool in secret. The pool of tokens is then doubled and then divided equally among everyone. Each subject can also keep the tokens that they do not contribute. Those who contribute below average or nothing are called defectors or free riders, as opposed to the above average contributors who are called cooperators. The group's total payoff is maximized when everyone contributes all of their tokens to the public pool, but each is incentivized to not contribute as keeping their money will render them the potential greatest payoff. Thus the Nash equilibrium in this game is simply zero contributions by all. If the experiment were a purely analytical exercise in game theory, it would resolve in zero contributions, because any rational agent does best contributing zero, regardless of what anyone else does. However, the Nash equilibrium is rarely seen in experiments. People do tend to add something to the pot. The actual levels of contribution found in experiments varies widely. Anything from 0% to 100% of the initial endowment may be contributed by the members. Repeated play public goods games involve the same group of subjects playing the basic game over a series of iterations. And experiments are repeated play public goods games done around the world, where players could punish other players for the way they played in the last round by paying a lower amount so that the other also received a lower payoff. Even though the experiments are exactly the same, the results varied greatly from one location to another. In some places, like parts of Germany and Denmark, the cooperation in these games started off high and it continued to remain high. In another part of the world, like South Korea, cooperation starts out in the middle and then over time increases to a sustained high level. In other parts, it starts low and continues to remain low. In these experiments, there was also seen to be a correlation between the degree of cooperation in the game and responses to questions in the World Value Survey that deals with people's responses to issues of public cooperation. Most common resources are public goods because they are non-excludable. However, they are often rivalrous in consumption because their use diminishes the value or lessens the quantity available to others. This is best illustrated by the parable of the tragedy of the commons. As an example of the tragedy of the commons, we can think about medieval England, where farmers used to raise sheep and allowed them to graze on common land that was freely available to everyone. When the population was small, the land could replenish itself on its own. However, as the population grew, they needed more sheep, so eventually the land was being overgrazed to a point where it could not replenish itself. Eventually, there was not enough common land to support the number of sheep. The reason why this occurs is again that the costs are being externalized and thus they are not being factored into the costs and benefits to the individual. Because anyone can use the land for grazing, no one has an incentive to grow the grass, to protect it, or to limit the number of sheep grazing on it. The tragedy of the commons illustrates one of the most interesting parts to the social dilemma, what is called a social trap. A social trap occurs when individuals or groups pursue immediate rewards that later prove to have negative or even lethal consequences. This type of dilemma arises when a behavior produces rewards initially, but continuing the same behavior produces diminishing returns. Stimuli that cause social traps are called sliding reinforcers, since they reinforce the behavior in small doses but then punish it eventually in a very large dose. An example of a social trap is the use of vehicles and the resulting air pollution. Feud individually, vehicles are an adaptive technology that has revolutionized transport and greatly improved the quality of life in many ways, but their current widespread use causes negative externalities. In many places, air pollution continues unabated because the convenience of driving a car is immediate, but the environmental costs are distributed out and often do not become obvious until much later. The social trap is interesting because in many circumstances the members performing the destructive activity can see that their action will lead to a disastrous long-term outcome, but if they are motivated by sheer short-term self-interest, they will find no way of avoiding it, thus creating a trap or tragedy. In the next video, we'll look at methods for enabling cooperation to avoid these tragic outcomes.