Other-Regarding Preferences and Different Institutional Arrangements in Exploitation of the River: Experimental Economics Results in Iran

The Dictator Game can describe many environmental challenges. That is the conditions where exploiters have asymmetric power in exploitation. For solving such environmental problems, solutions have been proposed, several of which focus on exogenous factors and others on characteristics of users. In this research, we are looking for a solution to one of these problems in the field of water for Iranian exploiters. To do this, we used experimental economics in the context of institutional analysis and development framework. The game was played in 19 groups of 5 participants with 1767 observations and then estimated using an econometrics model. This study showed that creating a club good downstream of the river and supporting local regulation (along with intra-system monitoring) can enable water distribution to occur more uniformly among users. Additionally, supporting local regulation has more substantial effects than the creation of club goods in water distribution. Furthermore, the data analysis obtained through the experiment and Ring Game shows that if the upstream exploiters have an other-regarding social value orientation, it produces positive effects on the exploit of other people so that the downstream exploiters also benefit from water. Thus, this research can have some implications for solving Iran's environmental problems similar to the dictator game.