The following essay will firstly discuss a method of how free riding is controlled in a public

goods game and then secondly will explain how this method can be used to solve a South
African economic issue. The economic issue that will be discussed using this experiment is an
environmental issue that South Africa is currently facing, namely ‘solid waste pollution’.

Common to the public goods game are free riders (Funak, Takeuchi & Vyrastekova, 2011: 919).
A free rider is someone who benefits from the contributions of other members without
contributing anything themselves (Cabrales et al., 2017:1085). Free riding causes a diminishing
return on society and therefore requires strategies to control it (Cabrales et al., 2017:149).

Each individual playing the public goods game has a different set of behavior and characteristics
(Cabrales et al., 2017:133). Some people are governed by different factors such as their social
norms as seen in their way they behave in society as well as reciprocity, which is a mutualistic
relationship in which both individuals do the same for one another and a relationship where one
will do less if the other does not contribute enough (Cabrales et al., 2017:140).

The experiment took place in a computer laboratory (Funak, Takeuchi & Vyrastekova, 2011:
922). In each round, each individual was given ten tokens and was then asked to distribute the
tokens between the public good or retain it in the private good (Funak, Takeuchi & Vyrastekova,
2011: 922).

The Nash equilibrium of this experiment, which is the best response of a player taking into
consideration what the responses of the other players will be, is to act selfishly and invest all
tokens in the private good (Walker & Halloran, 2004:235).

This experiment consisted of two parts. The first part involved the players playing numerous
rounds of a normal public goods game without the presence of sanctioning and an opportunity to
experience free riding (Funak, Takeuchi & Vyrastekova, 2011: 920).

The second part allowed the players to assign sanctions to other players who they suspected were
free riders. “This part of the experiment was then divided two treatments, namely the Standard
Sanctions Treatment and the Secret Sanctions Treatment” (Funak, Takeuchi & Vyrastekova,
2011: 919).

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The experiment’s theoretical predictions can be explained using two hypotheses (Funak,
Takeuchi & Vyrastekova, 2011: 921). The first hypothesis predicts that sanctioning does not
have a defined strategy and the severity of the sanctions assigned will be indifferent in both
sanctioning treatments (Funak, Takeuchi & Vyrastekova, 2011: 921).

The second hypothesis predicted that the players believed that sanctioning is intended towards
free riders and that it will cause the players to change their behaviour and decisions in order to
avoid the free rider position (Funak, Takeuchi & Vyrastekova, 2011: 921). This is true for both
sanctioning treatments (Funak, Takeuchi & Vyrastekova, 2011: 921).

The experiment presented two observations which explained the true behaviour of the subjects
(Funak, Takeuchi & Vyrastekova, 2011: 923). The first observation showed that the players
contributions to the public good were more significant when sanctions were present compared to
when sanctions were absent (Funak, Takeuchi & Vyrastekova, 2011: 923).

The second observation showed that players are scared of the free rider position and will always
avoid it when sanctions are present (Funak, Takeuchi & Vyrastekova, 2011: 927). They will
refuse to take the risk to contribute even a small portion to the public good out of fear of being
sanctioned (Funak, Takeuchi & Vyrastekova, 2011: 927). However, their behaviour is the exact
opposite during the absence of sanctioning as they are more willing to take bigger risks.

This experiment can be used to solve the economic issue of ‘solid waste pollution’ in South
Africa.

The rapid human population growth currently taking place has led to a rapid increase in
urbanization resulting in a rapid increase in solid waste affecting the environment. This causes
pollution as well as severely affecting people’s standard of living and health (Singh, 2019: 259).
Therefore, solid waste pollution is a major concern and successful control is critically needed
(Singh, 2019: 259).

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A major reason why the levels of solid waste have been such a major problem is the lack of
participation of the community (Lalitha & Fernando, 2019:196). The South African government
will not be able to control this problem on their own and will have to force communities to
participate (Lalitha & Fernando, 2019:196). This is where sanctions can play an important part
using the solution of recycling.

Governments can overcome this issue using a public goods game (Walker & Halloran,
2004:235). An experiment that took place in Yokohama Japan, that involved several
communities, used a successful program, which educated the community about solid waste and
assisted them in providing strategies to control and reduce their litter and waste (Bee Luan Ong
& Sovacool, 2012:38). Their main aim was to reduce their waste by 30% (Bee Luan Ong &
Sovacool, 2012:39).

The South African government can use a similar program to focus on recycling and cutting down
waste by a realistic percentage by implementing sanctions. Communities can decide how much
waste they want to contribute to the public good (recycle their waste) or retain their waste in the
private good (not recycling) (Walker & Halloran, 2004:235). Communities that reach or exceed
the percentage goal can be provided with rewards while communities that underachieve will be
charged sanctions by the government depending on how low their contributions were (Walker &
Halloran, 2004:236).

The findings from the sanctioning experiment above can be useful to policy makers as the data
analysis collected in the experiment has the potential to be reciprocated if a similar experiment
was conducted for the reduction of solid waste.

The data analysis of contribution behaviour shows that sanctioning is an effective method for
increasing community participation as can been seen in both treatments compared to when no
sanctions were assigned (Funak, Takeuchi & Vyrastekova, 2011: 922). This is useful to policy
makers as the majority of a community will probably not recycle if it’s voluntary and if there are
no punishments assigned as humans are lazy and will think about themselves before thinking of
others.

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The data analysis of the contribution dynamics shows that the free rider position is always
revealed and that the presence of sanctions initiates the avoidance of the free rider position and
balances the contributions of all players (Funak, Takeuchi & Vyrastekova, 2011: 927). This is
useful to policy makers as the players would be fearful of the free rider position and will rather
contribute more to the public good than risk being called a free rider.

The fact that sanctioning may be applied already should increase contributions, however with the
addition of a reward, the contributions should increase even more as the benefits for contributing
have now increased as there will be no sanctions and rewards will be received (Walker &
Halloran, 2004:236). Policy makers should include rewards as communities are more likely to
cooperate if they also get something in return.

This essay has looked at how free riding is controlled and removed in a public goods game using
sanctioning. The two treatments of sanctioning used in this experiment was a successful method
in managing free riding and can be used as a possible solution to reduce the economic issue of
solid waste pollution in South Africa. Even though the sanctioning experiment can be useful, it
can also be unreliable as it is a laboratory experiment and not a field experiment (Cabrales et al.,
2017:157). However, the economic issue takes place in the real world where people could
behave differently compared to when they are placed in a laboratory (Cabrales et al., 2017:157).
From this experiment, it can be deduced that sanctioning will result in the increase of
participation amongst communities in South Africa and can be useful to policy makers.

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Cabrales, A., Hojman, D., Bowles, S., Carlin W. & Stevens, M. 2017. The Core Team: The
Economy: Economics for a changing world. New York: Oxford University Press.

Lalitha, R & Fernando S. 2019. Solid waste management of local governments in the Western
Province of Sri Lanka: An implementation analysis. Waste Management. 84:194-203. DOI:
10.1016/j.wasman.2018.11.030

Singh A. 2019. Managing the uncertainty problems of municipal solid waste disposal. Journal of
Environmental Management. 240:259-265. DOI:10.1016/j.jenvman.2019.03.025

Vyrastekova, J., Funaki, Y. & Takeuchi, A. 2011. Sanctioning as a social norm: Expectations of
non-strategic sanctioning in a public goods game experiment. The Journal of Socio-Economics.
40(6):919-928.DOI: 10.1016/j.socec.2011.08.020

Walker, J.M. & Halloran, M.A. 2004. Rewards and Sanctions and the Provision of Public
Goods in One-Shot Settings. Experimental Economics. 7(3):235-247. DOI:
10.1023/B:EXEC.0000040559.08652.51