The Effect of Access to Clean Technology on Pollution Reduction: an Experiment∗

We study decisions in a dynamic game where firms’ private production leads to accumulation of a public bad, for example in the form of pollution. Firms have an option to invest in clean technology, which lowers emissions, or contributions to the public bad. The main treatment variable is access to clean technology, or benefits from such investment, which can be private or common. In the private access treatment, investment reduces firm’s own propensity to pollute. In the common access treatment, each firm’s investment reduces all firms’ propensity to pollute. For each treatment we characterize two alternative solution concepts – the Markov perfect equilibrium and social optimum. The level of public bad, or pollution, is lowest with public access to clean technology. This result is preserved when the group size is doubled and also in the presence of communication. The option to communicate induces coordination of investments in clean technology, leading to lower average pollution levels in both treatments. We categorize chat messages to identify communication patterns associated with higher levels of cooperation and efficiency. JEL classification codes: C90, C72, Q50, Q01, C61.