David K. Levine

Largesse design is a positive theory of what happens when players in a game, who have a limited willingness to sacrifice for the common good, can coordinate on a welfare-optimal solution. This theory provides an alternative to psychological theories in explaining why players engage in costly punishments and rewards. It also says that players will engage in other low-cost methods of encouraging pro-social behavior, for example, through reputation effects. In this paper, I study the properties and comparative statics of the largesse design problem. Despite a lack of concavity in the maximization problem, solutions are unique and continuous except on a lower-dimensional bifurcation set. In examples, I study these bifurcations, in which a small change in the parameters can lead to a large change in behavior or welfare.

We introduce a model of group behavior that combines expressive participation with strategic participation. Building on the idea that expressive voting in elections is much like rooting for a sports team, we give applications to both sporting events and elections. In our model there is an expressive externality: an individual enjoys an event more when more of her peers come out to support her preferred party or team. We show that this results in the possibility of “tipping”—that participation may jump up discontinuously when the externality becomes strong enough. We examine the implications for pricing by sports teams and for voter turnout.

We show that the treatment effect estimated by standard methods such as regression discontinuity analysis or difference-in-differences may contain a transient “learning effect” that is entangled with the long-term effect of the treatment. This learning effect occurs when the variable of interest is the agents’ efforts, when treatment and control correspond to success or failure: success or failure gives agents information about how much their effort matters, and consequently changes the amount of effort they provide after treatment. We examine the impact of the learning effect and when it is likely to be substantial. (JEL C13, C21, D72, D74, D83, I20)

A variety of experimental and empirical research indicate that prosocial behavior is important for economic success. There are two sources of prosocial behavior: incentives and preferences. The latter, the willingness of individuals to “do their bit” for the group, we refer to as internalization, because we view it as something that a group can influence by appropriate investment. This implies that there is a trade‐off between using incentives and internalization to encourage prosocial behavior. By examining this trade‐off we shed light on the connection between social norms observed inside the laboratory and those observed outside in the field. For example, we show that a higher value of cooperation outside the laboratory may lower the use of incentives inside the laboratory even as it increases their usage outside. As an application we show that the model calibrated to experimental data makes reasonable out‐of‐sample quantitative forecasts.