Behavior Under Climate Change In The Lab. Case

Study: Bolivian Andes

Fintan English ∗

Ignacio Garron Vedia †

Shreyo Mallik ‡

June 23, 2014

∗fintan.english@barcelonagse.eu†ignacio.garron@barcelonagse.eu‡shreyo.mallik@barcelonagse.eu

1

Abstract

This paper provides and extension to Escobar et al. [2013] paper about the ef-

fects of climate change on the decisions of farmers in the Latin American Andes

and how they adapt to optimise their income from their crops. We have carried

out a lab experiment at the Laboratori d’Economia Experimental (LeeX), Univer-

sitat Pompeu Fabra using the program ztree to observe how students from master

classes at the Barcelona Graduate School of Economics approach this problem. Our

paper extends the original paper by incorporating the effects that different leader

treatments have on the levels of water extracted by individuals. The main findings

our research has provided is that even though we introduce the leader treatment we

find that the individuals and groups do not tend to move towards the social equi-

librium, not adapting to the climate change effects. The results we provide seem to

match other research in the area finding that individuals tend to prefer the Nash

equilibrium.

Key Words: Climate Change, Adaptation, Leadership, Lab Experiment

2

1 Introduction

Climate change has been one of the prime environmental concerns in the recent

times. Several economics, especially those dependent primarily on agriculture have

been severely affected by it. Of particular interest are the villages in the Los Andes

region of Bolivia where the farmers are subsequently facing the challenges arising out

of the sudden change in climatic phenomena. In order to analyze this phenomenon,

we perform an extesion of the experiment ran by Escobar et al. [2013] in the labora-

tory with 25 Economics Masters students (divided into 5 groups each consisting of

5 subjects). We introduce a new type of treatment: the effect of leadership through

a democratic and a non-democratic form.

The effects of the climate change are affecting the supply of water, and therefore

impacting the agricultural decisions and productivity in the Andean villages of

Bolivia. As a response, households and farmers face the challenge of adapting to

these changes. Understanding their responses to this scenario and their willingness

to reach commitments is important for policy reasons. In the Bolivian Andes,

decisions are made based on a leader who makes the decisions for the community.

This leader could be elected or be in charge of the community by right (family

heritage). The aim of the paper is to investigate the effect of climate change on the

behavior of the individuals in the villages in Bolivia and that how they to adapt it.

We study about how the individuals tend to invest on strategies in order to save

water by deciding as whether to build a reservoir or not.

Regarding the selection of the leaders we followed two strategies: i) we used the

selected leader approach by Ertac and Gurdal [2012] for the dictator, even tough

we did not check differences in gender effects due to our small sample; and ii) we

followed Preget et al. [2012] for choosing the leader by voting, which explore the

idea that individuals preferences to be a leader is related to the subjects behavioral

type, finding that conditional co-operators are more likely to act as leaders than

free riders.

The remainder of this paper proceeds as follows: section 2 discusses the related

literature, section 3 presents the motivation of the design, section 4 describes the

theoretical model and parameterization, section 5 discuss the design of the experi-

ment, section 6 presents the results of the experiment and section 7 concludes the

3

paper.

2 Related literature

With climate change on the rise around the world many communities have to adapt

to try and protect their livelihood. In Bolivia, agriculture sector represents 12.95% of

GDP (as 2012), and is characterize by a poor industrialization level, which implies

that a large number of local producers are producing with a poor technological

level. As a result of climate change, many of these households that survive with

a simple type of agriculture, have largely been affected by changing temperatures

that is decreasing glacier equilibrium levels. This paper looks into the process of

adaptation to climate change and how individuals and groups can react to this

growing concern through treatments with leadership.

A paper by Escobar et al. [2013], which we are providing an extension to, sets

up framed economic experimental games to study the water consumption levels of

farmers and how they act to the possibility of adaptation to climate change. There

is a well established body of empirical work in to how and why people should adapt

to climate change, and the consequences this has. Adger et al. [2009] analyse the

endogenous limits in society to adapting to climate change. They find that issues

of values and ethics, risk, knowledge and culture create social limits that are able

to explain the challenges to successful adaptation. However, they conclude that

these limits are changeable. In other words, people seem to move towards the nash

equilibrium in any case.

In this paper we provide an extension to this idea, not just looking at how

communities adapt to climate change, but by carrying out a lab experiment with

25 economic master students, and adding a new type of treatment: the effect of

leadership through a democratic and a non-democratic way. We assess how different

treatments to decide which way a leader is put in power can change the outcomes

of adaptation. Ertac and Gurdal [2012] look at the differences between selfselected

and appointed leaders in their decisions, tying this in with the differences in gender

effects. They find that males who are elected leaders are more risky than those

put in the position of a leader. However, there find that there does not seem to be

this difference in individual risk attitude among women. Unfortunately our sample

4

size is not large enough to assess the differences between males and females, but we

were able to assess the different decisions made by those elected leaders in treatment

two and those put in the position as leader in treatment three. Preget et al. [2012]

explore the idea that individuals preferences to be a leader is related to the subjects

behavioural type, finding that conditional co-operators are more likely to act as

leaders than free riders.

When it comes to determining the group sizes in experiments Komai and Gross-

man [2009] find that the discrepancy between the leaders incentives and those of

an individual follower increases with group size. Whilst Weber et al. [2001] pre-

dict that small groups would succeed in achieving efficiency but large groups would

fail. Bearing this in mind along with the original paper we choose groups of 5 to

implement in our lab experiment.

The aim of this paper is to add to the growing experimental literature on lead-

ership and provide an extension to the paper written by Escobar et al. [2013],

by implementing three treatments that explore the effects of leadership on players

adaptability to climate change.

3 Motivation of the Design

The effects of the Climate Change are affecting the supply of water, and therefore

impacting the agricultural decisions and productivity in the Andean villages of Bo-

livia. As a response, households and farmers face the challenge of adapting to these

changes. Understanding their responses to these scenarios and their willingness to

reach commitments is important for policy reasons.

Climate change is a reality in the Bolivian Andes. Temperature, precipitation,

and humidity have changed considerably over the last 50 years Vuille et al. [2008].

Due to global warming, tropical glaciers have lost about half their volume and sur-

face area since 1975 (Soruco et al. [2009]), directly affecting high mountain biodiver-

sity, water availability (common pool resources) and living conditions of mountain

communities. In this sense, it is important to understand the mechanisms underly-

ing decision making processes of mountain water resources in face of climate change

impacts on the community livelihoods.

In the Bolivian Andes decisions are made based on a democratic via—simple

5

voting or a leader who makes the decisions for the community—or by a leader, who

makes the decision. This leader could be elected or be in charge of the community

by right (family heritage) or by an ”Ampliado”, which is the name of the reunions

in which the community has to choose a leader to make the decision. The first we

modeled by choosing the person who accumulated highest pay-off in the subsequent

games. While in the last, we give 1 minute to each group to choose their leader who

will take the decision of adapting (investing in a reservoir) or not to climate change.

4 Theoretical Model and Parametriza-

tion

Various economic experiments examine human behaviour in social dilemmas re-

lated to the extraction of common pool resources. These models are based on a

payoff function for which individual resource extraction increases individual earn-

ings, sometimes at a decreasing rate, while the extraction group reduces individual

earnings; this choice represents the typical dilemma of a resource extraction of com-

mon use. Following Escobar et al. [2013] the model proposed is an extension of

these models for extracting common pool resources, represented by the following

payoff function:

πi = αxi −(βx2i )

2+ δ(S −

∑xj − xi), j 6= i (1)

Where profits of each individual (πi) is determined by the amount of water that

extracts (xi), the sum of water that his group (other 4) extracts as a whole (∑xj−

xi), discounted by the fixed level water depending on the weather (S) conditions

(SNormal,SLow and SDrought) which faced at the each period.

From this theoretical model, researchers could simulate the strategic decisions

of a group of n users that use a common resource limited by an amount S. In

the experiment, the common resource corresponds to a supply of water used for

the communities necessities, managed by an irrigation district. Because this is a

common resource, the optimal amounts drawn from the social point of view are

different from those from the private view. As a result multiple equilibriums can

6

arise. First, the privet private maximizing decision of each individual leads to Nash

equilibrium (2):

xNashi =

(α+ δ)

β(2)

The socially optimal extraction is less than that obtained in the Nash equi-

librium. It should be noted that the state or availability of the resource (S) has

no effect on the incentive structure of individuals, as harvest levels in the Nash

equilibrium and the social optimum do not depend on the abundance or scarcity of

water. The experimental design should include a stochastic component representing

fluctuations in the weather and affects the natural state of the resource. These fluc-

tuations are exogenous to the model due to the uncertainty associated with them.

Through a stochastic process, natural climate variability, particularly rainfall, can

lead to the amount of water available in a normal period (Sn), while in another

period it may be lower (Sl):

xSoci =(α+ nδ)

β(3)

When climate change is introduced, extreme events cause the amount of water

available to be even lower, resulting in periods of drought (Sd). In any case, the

amount of available water reserve will be defined by St being Sdn > Sl > Sd.

Therefore, although the private and social equilibriums are not modified by including

fluctuations in climate, the benefits of each player in the Nash equilibrium and the

social optimum itself are subject to the natural state of the resource. With this

information, the game is designed in three stages or phases.

During the first phase of the game, the two possible states of nature are normal

(n) and low (l), as well as the amount of resource available is Sn and Sl respectively.

As a result of natural climate variability, the state n occurs with probability p, and

the state Sl occurs with probability 1 − p. Thus, individuals who play their Nash

wing expected benefits:

E[πNashi,t ] = p ∗ [πNash

i,n ] + (1− p)[πNashi,l ] (4)

7

In the second phase of the game climate change is introduced, so that the change

in the weather becomes severe, affecting both the magnitude of changes in climate

and the frequency at which they occur. Now, with occurrence probability q (with

q > p), the level of appeal will be Sn < Sd. Thus individuals playing their Nash

strategy would have the following expected benefits:

E[πNashi,t ] = q ∗ [πNash

i,n ] + (1− q)[πNashi,s ] (5)

In the third and final stage of the game it is possible to adapt to climate change in

advance, so that even in case of an extreme event, preventive actions allow resource

availability to remain within the level generated by natural climate variation. This

adaptation has an investment cost c and a prolonged effect K on community activity.

Adapting decreases the effect of climate change on the resource for the next K

rounds after making the investment. In this case, we are going to measure the

impact of a dam in certain communities by the amount of available water reserves

in K rounds. The adaptation provides access to a Sn level resource when it could

have been Sl, if it had not been carried out.

To determine whether adapting is a good strategy, the researcher must solve

the game by backward induction. The player assumes that no matter the level

of the resource, the result will be that all players will play the Nash equilibrium

determined by his individual strategy. If individuals choose to adapt, this will make

the resources, given the probability q, decrease to the value Sl and not until Sd.

If individuals do not adapt, and are affected by the extreme event, the resource

decreases to a value, such that Sl > Ss. Assuming that individuals are symmetric

and risk-neutral and that they prefer to adapt and pay a c cost, as long as they meet

the benefits of doing so, they are at least equal to those of not doing so, in expected

value. From this relationship, we can estimate the maximum cost of adaptation (c)

as:

C = (1− q) ∗K[πNashi,l − πNash

i,s ] (6)

Thus if the individual cost to adapt is equal to c, the individual will be indifferent

to the choice of adapting or not. Faced with higher costs, the individual would prefer

8

to take the risk of facing drought, while at a lower cost, the individual would always

pay to adapt. The model is parametrized following Escobar et al. [2013] as follows.

Parameters

Cropping Cycle 1 year α 100 SNormal 80

Reservoir cost (per person) 500 β 10 SLow 60

Reservoir Cost (per group) 2500 γ 20 SDrought 40

Results

State St xNashi πNash

i,n πSoci,n πSoc

i,n (xSoci = 1)

Normal 80 8 0 1280 1595

Low 60 8 0 880 1195

Drought 40 8 0 480 795

Table 1: Specification of the Model and Results

5 Design of The Experiment

The experiment was held in the Laboratory of Experimental Economics (LEEX) at

Universitat Pompeu Fabra with the MSc. candidates in Economics, Public Policy

and International Trade and Finance. Each member at the beginning of the exper-

iment had a sheet in which the experiment and his role of the game was explaind.

Eventhought the game was not paid with monetary units, we gave individuals one

chocolate for participating and an extra chocolate in each group to the persone who

had the highest accumulated pay-off. This person at the same time was the Dictator

as will be explain later.

Our game consisted of 5 groups of 5 people who had to take part in 21 rounds.

This was split into3 stages. Members of each group had to decide how much water to

extract per round from a number between 1 and 9. This was based on probabilities

of weather conditions that were explained to the individuals at the start of each

round.

Just as in Escobar et al. [2013], each round represents a cropping cycle equivalent

to one year. In our program in each round the individuals on their screen are

displayed with the probability of the given weather conditions that they may face in

9

each round. After this has been displayed then each person is allowed to extract a

certain amount of water. All of the extracted amounts are stored by the computer;

following this the program generates a random number n that will determine which

weather condition each person faces. We used the Ztree program for the design of

the project. Their payoffs are then displayed on the screen along with the amount

they extracted and the total amount that the group extracted. This happens for

each of the 21 rounds. At the end of the 21 rounds then each individuals payoff is

calculated and if they are the highest earning member of their group then they are

paid in the form of chocolate.

i) Stage 1. Natural Weather Conditions

In this first stage the possible weather conditions faced by all of the groups are

either low weather conditions that sets S as 60 or normal weather conditions that

sets S as 100. In this first stage the possibility of playing in the low state is p = 14

and thus the possibility of playing the normal state is p = 34. This is determined

by a random number (n) generated for each group in the ztree program. This is a

random number between 0 and 1, so if n ≤ 0.25 then the group of 5 is put in the

low weather state and vice versa.In this stage we have not yet introduced climate

change so for now there is only the possibility of normal levels of rainfall or low

levels of rainfall.

ii) Stage 2. Climate Change

Now in this stage we introduce the possibility of climate change that leads to

there either being the chance of a draught that sets S as 40 or normal weather

conditions. Now in this stage the possibilities of the given states of weather change.

The chances of there being a draught are now greater than the low state in the

previous stage. In this stage the probability of there being a draught as a result of

climate change is now q = 25 and thus the probability of a normal state is q = 35.

Thus, as in the first stage, a random number (n) for each group is generated in ztree

and this will determine which state the groups are in. So if this random number

n ≤ 0.4 then the group will enter into the draught state, otherwise they will face

normal weather conditions. In this stage we have introduced climate change and

now the poor weather conditions are more severe and damaging.

iii) Stage 3. Adaptability

During the third stage of the game the individuals are exposed to 3 different

10

treatments which give them the chance to adapt to the present possibilities of cli-

mate change by being allowed to build a reservoir. This reservoir allows them the

possibility to store additional water so that in the case that there is a draught,

rather than receiving the draught payoffs, they receive the low weather condition

payoffs. The probabilities of playing under the given states is still the same as in

round two, the only difference is that now with a reservoir when there is a draught,

groups will enter into a state of low weather conditions. If a group adapts to the

draught by building a reservoir, this will last for 3 rounds and they only have this

option at the beginning of each of the 3 treatments. The reservoir comes at a cost

however. As explained in the original paper to make the payer indifferent between

adapting and not adapting, assuming that they are risk neutral the reservoir cost

needs to be set at 480. This is the amount paid by each player per group that

decides to construct a reservoir. For the sake of ease of calculations, the price is set

at 500, so if a group decides to built a reservoir the total cost is 2,500. The three

treatments are as follows.

Simple Voting

In this treatment at the beginning of the three rounds the members of the group

take part in a silent simple bid majority vote. Thus, if as a majority the group

votes to build a reservoir then all the members of the group are required to pay a

cost of 500 to construct the reservoir, whether they voted in favor or not. However,

if there is a majority vote to not build the reservoir then no one is required to pay

and costs. As stated before, this reservoir only lasts for 3 rounds. The treatment

then lasted for 3 rounds.

Leader

In this treatment, instead of voting within the group to decide whether to build

the reservoir or not, we gave the group a minute or two to decide among themselves

who should be the leader of the group. Once the groups had picked a leader we

asked this person to decide for the group whether or not their group should build a

reservoir or not. Following this the groups had to either pay the costs of building a

reservoir or not. The treatment went on for 3 rounds.

Dictator

In this thirds and final treatment we introduced the idea of a dictator. With

this we decided to pick the dictator based on which member of each group had

11

managed to accumulate the highest payoff of until this treatment, and then they

were assigned as the dictator for their group. The dictator decided for the group

whether or not they should build a reservoir or not. Depending on whether or not

the dictator decided to build the reservoir or not the group incurred the costs. As

in the previous two treatments, this treatment lasted for three rounds.

6 Results of the Experiment

As we explained in Section 4, we use the model proposed by Escobar et al. [2013],

which give us the pay-off function of each individual under the three weather con-

ditions. Figure 1 illustrates the distribution of the decision of extracted units under

the possible waether conditions and the overall mean (Total). The distribution of the

units of water extracted is negatively-skewed irrespective of the climatic conditions-

be it a drought, low or normal weather. This indicates the fact that individuals are

interested on maximizing their personal pay-off—the most frequent level of extrac-

tion (8) is the Nash equilibria—whatever might be the weather conditions. Even if

there is not a drought, they do not extract lesser units. On the contrary, if there is

a drought, it is quite legitimate that they would prefer to draw more units of water

for maximizing their pay-off.

12

010

2030

010

2030

1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9

Normal Drought

Low Total

Per

cent

Units of Water ExtractedGraphs by s

Figure 1: Percent frequency of water use for each possible level of extraction for each

season

Even tough, we introduce the possibility of adapting to climate change in Stage

3 and groups have gone trough 21 rounds, we do not observe any particular pattern

or trend between the groups in terms of the average units of water extracted (Figure

2). While groups 2 and 3 tend to attain the social equilibrium toward the end of the

experiment, groups 1, 4 and 5 dont seem to move in the same direction. Overall,

this is ambiguous, and that we do not identify any specific trend across groups in

terms of the average units of water extracted by them.

13

45

67

89

Ave

rage

Uni

ts o

f Ext

ract

ion

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21Period

Group 1 Group 2Group 3 Group 4Group 5

Figure 2: Path of average water extraction decisions, along the 21 rounds of play for each

group analyzed

Table 3 presents the results of the votes and adaptation decision of each group

by each treatment. In the 3rd stage, we had 3 segments each consisting of 3 rounds-

Simple Voting, Leader and Dictator. In Simple Voting, 4 out of 5 groups voted

in majority in favour of building a reservoir. In the 2nd and the 3rd segments

with a leader and a dictator respectively, 3 out of 5 leaders decided to build a

reservoir in their respective groups. In the 2nd segment (Leader), group 3 builds a

reservoir but not group 4. On the contrary, the reverse happens in the 3rd segment

(Dictator). Thus, the decisions of the leader (chosen anonymously) and the dictator

in the same group may differ as well though it remains the same in most of the

cases. Furtheremore, there is a decrease in the number of groups deciding to build

a reservoir in the 2nd (Leader) and the 3rd (Dictator) rounds compared to the 1st

one. This reflects the fact the will of the members in a group may be suppressed by

the decision of the leader or the dictator in the group. When the subjects in a group

select a leader, they might not be able to anticipate how the leader is going to behave

in future. This is reflected by the change of the decision of building a reservoir in

the 1st segment (Simple Voting) and 2nd segment (Leader). The decision of the

dictator is not comparable with the decisions in the 1st and the 2nd rounds, since he

is the one who has accumulated the highest aggregate points across the last rounds.

14

At the same time, the dictator is the one who has been able to maximize his pay-off

until round 18 and would adopt the best strategy to maximize his pay-off in every

possible way. With this, we capture the idea of Bolivian traditional Leadership.

Simple Voting Leader Dictator

Reservoir Votes Reservoir Votes Reservoir Votes

Group 1 Yes 3 No 0 No 0

Group 2 No 1 Yes 5 Yes 5

Group 3 Yes 3 Yes 5 Yes 5

Group 4 Yes 4 Yes 5 No 0

Group 5 Yes 5 No 0 Yes 5

* Votes are defined as the votes in favor of building the reservoir.

Table 2: Responses to treatments in each group

Let us now concentrate on how the path of average water extraction varies in

the 3 segments with the introduction of the various treatments (Simple Voting,

Leader and Dictator) in the final stage of the experiment (Figure 3). We can see

that with the 1st treatment (Simple Voting), 4 out of 5 groups increased their

average extraction toward the end of the 3rd round of treatment 1 while the reverse

was observed for the remaining group. Whereas, with the introduction of the 2nd

treatment (Leader), and the 3rd treatment (Dictator), 2 out of 5 groups increased

their average extraction toward the end of the 3rd round of treatment 2 whilst the

reverse was observed for the remaining 3 groups. On the whole, the phenomenon is

shrouded in ambiguity —it is not possible to distinguish a common pattern among

groups—. However, with the introduction of the leader and the dictator, the groups

tend to achieve the social equilibrium compared to Simple Voting (Democracy).

Thus, if democracy would have been introduced after the other 2 treatments- Leader

and Dictator, perhaps a more efficient democracy would have been feasible (order

effects).

Since all the groups were independent across the horizon of the experiment, we

performed Wilcoxon Rank-Sum test in order to compare across groups. The differ-

ences in the group averages (excepting that between the 3rd and the 4th groups)

are statistically significant. It points out the very fact that the groups are samples

15

T I T II T III

56

78

9A

vera

ge U

nits

of E

xtra

ctio

n

13 14 15 16 17 18 19 20 21Period

Figure 3: Path of the extraction decision average along the 21 rounds of play for different

treatments (each color corresponds to each group)

from different populations. This is in alignment with the Columbian Los Andes

case (Escobar, Cuervo, Trujillo and Maldonado 2013). Since the groups represent

different villages, they are expected to behave differently, and that they do so in

the experiment. However, all the subjects in our experiment were from different

countries across the globe. So, they exhibited different behaviour as expected. The

fact that the groups behaved as if they were sample from different populations is

actually induced by the fact that each subject itself is from a different population

(country).

Since all the groups were independent across the horizon of the experiment, we

performed Wilcoxon Rank-Sum test in order to compare across groups (Table 3).

The differences in the group averages (excepting that between the 3rd and the 4th

groups) are statistically significant. It points out the very fact that the groups are

samples from different populations. This is in alignment with the Colombian Andes

case (Escobar et al. [2013]). Since the groups represent different villages, they are

expected to behave differently, and that they do so in the experiment. However, all

the subjects in our experiment were from different countries across the globe—we

had 25 people from 15 different countries—. So, they exhibited different behaviour

as expected. The fact that the groups behaved as if they were sample from different

16

populations is actually induced by the fact that each subject itself is from a different

population (country).

xi Average Group 1 Group 2 Group 3 Group 4 Group 5

Group 1 7.55 7.55

Group 2 6.72 0,83** 6.72

Group 3 6.02 1,53*** 0,7** 6.02

Group 4 7.02 0,53* 0.3 1*** 7.02

Group 5 5.92 1,63*** 0,8*** 0.1 1,1*** 5.92

Two-sample Wilcoxon Rank-Sum (TWR) Test. ∗(p < 0.1), ∗ ∗ (p < 0.05),∗ ∗ ∗(p < 0.01).

Table 3: Mean differences in extractions xi per group

Table 4 gives the average number of units of water extracted by each of the

5 groups during drought and normal weather conditions in the 1st and the 2nd

stages of the experiment, since in the 3th Stage individual observations are not

independent. It also gives the difference in the average number of units of water

extracted by each of the 5 groups during drought and normal weather conditions in

the 1st and the 2nd stages of the experiment. According to Wilcoxon Rank-Sum

test the differences in the average number of units of water extracted by each of

the 5 groups during drought and normal weather conditions in the 1st and the 2nd

stages of the experiment, are not statistically significant (90% of confidence level).

This reflects the fact that the groups do not behave differently given a change in

weather conditions. This is quite consistent with the fact that the individuals are

themselves from different populations and they are always interested in maximizing

their personal pay-off which makes them indifferent to any change in climate.

17

State E(xi) Normal Drought

Overall Group mean

Normal 6.70 6.70

Drought 6.60 [0.10] 6.60

Group 1 mean

Normal 7.71 7.71

Drought 7.38 [0.33] 7.38

Group 2 mean

Normal 6.80 6.80

Drought 6.68 [0.12] 6.68

Group 3 mean

Normal 6.12 6.12

Drought 5.89 [0.23] 5.89

Group 4 mean

Normal 7.56 7.56

Drought 6.85 [0.71] 6.85

Group 5 mean

Normal 5.93 5.93

Drought 5.91 [0.02] 5.91

[ ] denotes for non-significance at 90%.

Two-sample Wilcoxon Rank-Sum (TWR) Test.

Table 4: Statistical analysis of differences in average water extraction decisions under

each state of the resource, by groups.

18

7 Conclusions

In this paper we provide an extension to Escobar et al. [2013], by carrying out a lab

experiment with 25 BGSE master students and studying their behavioral responses

under climate change. In particular, we add a new type of treatment: the effect of

leadership through a democratic and a non-democratic form.

Overall, the effect of our treatments are ambiguous in the sense that we do

not identify any specific trend across groups in terms of the average units of water

extracted by them. This could reflects the fact that the groups do not behave

differently given a change in weather conditions. At the same time, we did not

find differences in extractions within groups, which is quite consistent with the fact

that the individuals are themselves from different populations and they are always

interested in maximizing their personal pay-off which makes them indifferent to any

change in climate.

In this sense, the empirical evidence gather in the lab states what other works

have reached (Adger et al. [2009], Escobar et al. [2013]: individuals tend to move

to the Nash equilibria in any case and thus they are not willing to adapt their

behaviour to climate change. This seems to be also true by analysing the leader

effect from our results.

An interest extension of this paper could be analyzing the possible effects that

order effects could trigger in the experiment. We did not perform this in our experi-

ment since we have small-sized groups. However, there could have been difference in

the learning effect of the individuals since they go on learning through the rounds.

Furthermore, the cost adaptation is introduced in the 3rd stage. So, altering the

order of the treatments could potentially affect the decision to build a reservoir and

hence the pay-off function. It could be noted if the cost of adaptation is higher than

that of facing a drought, then the player might prefer to face a drought and vice-

versa. Also, if in a certain round, the player has faced a drought and got accustomed

to it, he might prefer to go for the decision of not building a reservoir.

19

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