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In public good games, voluntary contributions tend to start off high and decline as the game is repeated. If high contributors are matched, however, contributions tend to stay high. We propose a formalization predicting that high contributors will self-select into groups committed to charitable giving. Testing this experimentally, we let subjects choose between two group types, where one type donate a fixed amount to a charity. Contributions in these groups stayed high, whereas contributions in the other groups showed the well known declining pattern. One implication is that corporate social responsibility may attract more responsible employees.

By combining a theory of herding behavior with the phenomenon of availability heuristic, this paper shows that non-informative advertisements can affect people's choices by influencing their perception of product quality. We present a model in which people can learn about product quality by observing the choices of others. Consumers are, however, not able to fully distinguish between the observations of real people and fictitious characters in advertisements. Even if a person is aware of this limitation and updates his beliefs accordingly, it is still rational for him to choose the product he has observed most often. In equilibrium the most observed product is always most likely to be of the highest quality. The analysis has important policy implications.

The European Union has introduced directives that aim to liberalize and integrate electricity and gas markets in Western Europe. While progress has been made, particularly in electricity markets, there have been setbacks: for example, because of concerns about national interests and security of supply. Thus it is possible that only part of the energy industry in Western Europe will be liberalized. We use a numerical model to assess what types of liberalization – electricity vs. natural gas; domestic markets vs. international trade – are most influential in decreasing prices and increasing welfare in Western Europe. We find that a partial liberalization of electricity markets has greater quantity and welfare effects than a partial liberalization of gas markets, and that liberalizations of domestic energy markets have (overall) greater effects than liberalizations of trade in energy between Western European countries. Finally, the shortrun effects primarily parallel the long-run effects, though they are significantly smaller.

There is no consensus on how to measure interpersonally comparable, cardinal utility. Despite of this, people repeatedly make welfare evaluations in their everyday lives. However, people do not always agree on such evaluations, and this is one important reason for political disagreements. Thus, to keep in control of the normative premises, decision makers may prefer information which can be used as input in an arbitrary social welfare function to information which is the output from a social welfare function specified by the analyst. In this paper we try to identify sufficient welfare indicators; information which enable decision makers to arrive at welfare evaluations of social states or projects, according to their own ethical beliefs. Our conclusion is that providing factual information about different population groups; their social state, size, and characteristics, may be better for this purpose than the more traditional approach of focusing on ordinal utility information.

This paper adopts soil scientific models of soil productivity and degradation in Tanzania into an intertemporal optimisation framework. The farmers choose labour input, capital investment and fertiliser input to maximise soil wealth, i.e., the present value of soil rent. First we focus exclusively on soil mining, considering the nutrient stocks as determinants of land productivity. Next, we focus on soil erosion, and include rooting depth as determinant of land productivity. We compute the soil wealth under the assumption that the opportunity cost of labour is equal to current wages, or alternatively equal to zero. Our estimates suggest that the potential gains from change in agricultural management are considerable. Moreover, the shadow price on root depth and hence the returns to land conservation investments are highly sensitive to our labour market assumptions. We also find that the value of the eroded soil amounts to 12–17 per cent of the value of Hicksian income, and the savings required to maintain consumption amounts to 13–29 per cent of the contribution to GDP.