Author: Róger Madrigal rmadriga@catie.ac.cr

1. Author: Róger Madrigal rmadriga@catie.ac.cr Effect of social context and group conformation on cooperation levels: Application of IAD framework and experimental evidence from an irrigation system in Costa Rica.

2. Structure of the presentation • Case study: Application of IAD (Institutional Analysis and Development Framework) • Experimental evidence • The Voluntary Contributions Mechanism • Trust game • Ultimatum game

3. Application of IAD framework Two moments in time (1993 and 2003) How do institutional changes affect water use patterns?

4. Arenal Tempisque Irrigation District (DRAT) Located in a complex watershed: tourism, hydroelectric generation, irrigation and protected areas (RAMSAR site) 30 000 ha, mainly rice and sugar cane Poor water use Administered by the Central Government Lack of farmers´ organization

5. Attributes of community Homogeinity (Long time horizons, live near their plots, young people) Willingness to collective work Familiarity among the 60 farmers 1993 Situation Attributes of physical world Limited water, pumped from river Concrete canals High rice productivity (7-8 ton/ha) Action arena Interactions Outcomes Rules-in-use Rotation, low final drainages, water reutilization, crop scheduling Conflict resolution mechanisms for small disputes Every farmer participates in maintainance of canals Evaluative criteria

6. 1993 Situation Interactions Collective work, coordination among institutions (promoted by SENARA) Attributes of community Action arena: SENARA, Users Association, other governmental institutions Attributes of physical world Outcomes Water use efficiency 93% Quality in service Maintenance labor by users (received money further invested in roads, schools) Rules-in-use Evaluative criteria Equity (between benefits and costs, social inclusion, among users) Low monitoring costs (due to rotation rules. etc) Sanctioning (only social but no legal possibilities to punish free-riders on maintenance or excessive waste of water)

7. Attributes of community Heterogeneity among users, uncertainty, plot renting, absentee landlords Unsuccessful experiences with previous organization attemps 2003 Situation Attributes of physical world Abundant water (with temporal scarcity) Lower rice productivity (4-5 ton/ha) Action arena Interactions Outcomes Rules-in-use No rotation, high final drainages, no reutilization of water “Ilegal” manipulation of gates Evaluative criteria

8. 2003 Situation Attributes of community Interactions Minimal interaction, SENARA provides all services to farmers (subsidized system) Farmers work individually Action arena: SENARA and independent farmers Users Association no longer exists Attributes of physical world Rules-in-use Outcomes Poor water use efficiency 69% Low quality service Canals maintainance by SENARA only, no organization of farmers for using water Evaluative criteria No equity (disproportionate benefits, social exclusion on decisions, some farmers obtain more water than others) High monitoring costs (no rules, absentee landlords) No sanctioning (social punishment is ineffective, no legal possibilities to deter free-riding or excessive waste of water

9. Lessons • Water scarcity is not a sufficient condition to promote cooperation towards water use. A set of conditions from the community (homogeneity, shared temporal horizons, shared norms, similar interests) is also needed. • Rol of governments: • If governments want to decentralize its activities, they must give communities the power to make decisions (legal possibilities to sanctioning, fundraising etc) • Government intervention can be positive (information, mediator among actors) to raise cooperation levels.

10. A group of 20studentsfrom CATIE MSc level, different backgrounds No experience with experimental economics Age average: 30 years old Written instructions, readed it aloud. Played with poker cards to facilitate understanding A group of 30 farmersfrom DRAT Most of them with only elementary school Poor small farmers: (mainly of rice and sugar cane) Age average: 50 years old No written instructions, round of practice, help to fill out the answer sheets. Played with poker cards Experimental evidence

11. 1. The Voluntary-Contributions Mechanism This game represents a similar situation to those faced by farmers who organize around irrigation canals maintainance or another collective objetive Act individually and enjoy others effort (private exchange) Cooperate with others (group exchange) VCM: Simple repetitive game. Decisions are private and annonimous. No possibilities for communication. Incentives to free-ride

13. Key results • Strong effect of comunication on cooperation levels for the case of students (p>0.01). This is only for round inmediately after communication, then cooperation decays • Farmers seem insensitive to communication ¿?

14. Policy implications 1. Even when the benefits for cooperating are self evident for everyone, some individuals will try to obtain them free (cause of cooperation decay in case study) Need for monitoring, control and effective sanctions

15. 2. Cooperation levels of producers are relatively low, in spite of communication (powerful tool but ineffective unless it rises mutual trust) It is not enough to foster social communication unless other necessary conditions of the group hold (similar interests, previous experiences of cooperation, cohesion, trust, leadership?)

16. 3. Agreements and communication can have a strong effect in a group with identity and social cohesion (students) but even in that situation, it is not a sufficient condition to maintain cooperation levels. Grim-trigger hypothesis Monitoring and sanctioning are crucial to self regulating organizations, otherwise people could try to punish free-riders by defecting

17. Trust and reciprocity are key elements for building cooperation and social capital. Hence, these factors are necessary for allocation decisions and the maintenance of irrigation canals 2. Trust game

18. Repeated Prisoner’s dilemma structure, similar to Ahn et al1999. Pairs of players, annonimous, no communication Trust others to gain more money but with a higher risk of loosing everything Defect and gain a small amount of money

19. Round 1 Round 2 Round 3

20. Additional results Importance of previous result on present individual decision (inequity aversion hyphotesis, Fehr and Schmidt 1999) : When somebody received less than he gaves, tends to give less in the next round... Similar, when somebody received more than he gaves, tends to give more in the next round Importance of reciprocity

21. Ostrom, E (2003): Lists 6 reciprocity norms that some people are likely to use when confront a repetitive social dilemma The results of this game support the following reciprocity norm:

22. Mimic norms 1 or 2 (1.always cooperate first; stop cooperating if others do not reciprocate; and punish non-cooperators if feasible 2. Cooperate immediately only if you judge others to be trustworthy; stop cooperating if others do not reciprocate; punish non-cooperators if feasible), but stop cooperating if you can successfully free ride on others

23. Policy implications • Inequities (social exclusion, differential access to water) can lead to a downward spiral of cooperation. Start reducing inequities! • Farmers showed lower levels of mutual trust. Previous social linkages and past experiences of cooperation matter. It is difficult to “promote” an effective decentralization process in this setting. It requires a long and costly process of building social capital • Group differences don`t matter when there is no chance of future interaction (Most people try to free ride in these cases). A necessary condition to a sustainable organization is a solid long term perspective from of all of participants

24. 3. Ultimatum game The core relationships in repeated social dilemmas are the links among mutual trust, the investment others make in trustworthy reputations and the probability of using reciprocity norms. Boundedly rational individuals use reciprocity based on their prior experience (socialization) and their own norms

25. 1 Suggest a division of a fixed pie One shot, sequential game 2 Decides to accept or reject the offer Subjects frecuently offer the fair (50-50) division Contradicts the model of rationality It suggest the “punishment hypothesis ”, based on reciprocity

27. Policy implications • Group characteristics, past experiences using reciprocity and risk aversion of small farmers may explain the higher frecuency of “fair” divisions. It is necessary to consider poor farmers decission making process • Poor farmers may prefer tangible inmediate benefits from cooperation rather than uncertaintaty future benefits from such interaction

28. Thanks!!