Associate professor of finance unveils lecture

By Jason Klaiber

[image courtesy of sbu.edu]

During last week’s Thursday forum, associate professor of finance Bryan McCannon unveiled his lecture entitled “Leadership and Motivation For Public Goods Contributions” to faculty members.

In his talk, McCannon discussed public goods, which he identified as a problem in economics. Public goods, not to be confused with publicly provided goods such as education and health care, are goods that are non-excludable and non-rivalrous in consumption. Examples of public goods include parks, national defense, service activities, lighthouses, radio, Google, and cancer research.

McCannon also outlined the free rider problem, which is a situation that occurs when people enjoy the benefits of public goods but are unwilling to contribute to them. Cancer research is representative of this dilemma; everyone would be happy if scientists found a cure for cancer, but not everyone would donate to cancer fundraising.

“If free riding is pervasive, it’s argued that this provides a coordinating role of government,” McCannon said.

During the 2012-2013 school year, McCannon set up a leader-follower public goods experiment and allowed St. Bonaventure students to participate in over nine sessions. The 147 experimental subjects were divided into random groups in which one student served as the leader. Each group consisted of four players, each of whom were endowed with $5. Each member of the group then had to contribute simultaneously to a common pot. On average, the leader of any given group would contribute about $3.75 of their $5.

The experiment’s objective was to focus on how the structure of the fundraising influenced the amount of money pooled. The results exemplified that psychological rather than social preferences influenced the student’s behaviors. If an experimental subject was randomly selected to contribute money, he or she would give more because they know others would observe their decision.

“People’s behaviors are driven by other people’s assessment of [their] behaviors,” McCannon said. “The more the leader gives, the more the follower gives. If the leader doesn’t kick in anything, everyone else follows suit.”