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Environmental investment decisions: experimental evidence of team versus individual decision making

Authors Simon Felgendreher
Magnus Hennlock
Åsa Löfgren
Conny Wollbrant
Publisher University of Gothenburg
Place of publication Gothenburg
Publication year 2018
Published at Department of Economics
Language en
Keywords group behavior, investment inefficiencies, policy instruments
Subject categories Economics


We study experimentally how investment decisions are affected by equally stringent but different policy regime treatments and how differences depend on whether decisions are made individually or in groups. In our experiment, subjects decide on an investment level either individually or jointly in groups of three. In addition, decisions are made subject to either a tax or performance standard treatment. We find that investments are significantly higher and closer to the level that maximizes revenues of the hypothetical firm in the performance standard treatment. This holds for both individual and group decisions, but we find no evidence of an interaction effect. Even though groups seem to have a knowledge advantage, they are not able to benefit from it, since intragroup communication is not able to transmit the microeconomic reasoning to group members without such knowledge. Also, groups are not able to attenuate the attention bias of focusing on selective information depending on the specific policy treatment.

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