An experimental study on the effects of co-payment in public services

We analyze the effect of imposing a charge for the individual appropriation of common resources. In our design, withdrawing the maximum amount is the dominant strategy for every player, but the resulting equilibrium is socially inefficient. We find that the presence of a price, small enough to leave intact the trade-off between individual incentives and collective welfare, is not effective in reducing appropriation among players who have previously played without it. On one hand, the upward trend in the average extraction of common funds continues after the introduction of a price. On the other hand, the presence of a price does decrease withdrawals, in comparison with a baseline treatment without any charge, as long as it is imposed from the outset. Our design sheds light on the conditions for the effectiveness of co-payment in curbing the over-consumption of public resources, most notably in the realm of healthcare.