Don’t wait on the world to change! How technophilia causes group inaction – an experiment

Individual consumption often creates negative group externalities, the cost of which accumulate over time. Technological progress may reduce the future abatement cost. We show that the mere prospect of such progress has a pernicious effect on a group’s ability to coordinate on actions that are individually and socially optimal. Our 2x2 experimental design extends the game in Walker et al. (2000) to a multi-period setting with a voting stage. We introduce treatment variation in the possibility of exogenous reductions in the abatement cost and in how group members divide the accrued cost: equally or in proportion to each person’s consumption share.
We find that, independent of which cost-sharing mechanism is in place, introducing the chance of technological progress reduces social welfare because less participants vote for settlement in the present: The hope for technological breakthroughs causes costly inaction.