07p_Mussi:tipska.qxd 71 Fabricio Baron Mussi*, Ubiratã Tortato Pontifícia Universidade Católica do Paraná, Brazil Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2018/23(2) Cooperation, the Crowding out Effect and the Role of Incentives in the Case of Sustainable Hydroplant Project in Brazil DOI: 10.7595/management.fon.2018.0011 1. Introduction In sustainability studies, we see an increasing number of technical analyses on the socio-environmental im- pacts caused by major corporations in the area of power generation (Morimoto, 2013; Liu et al., 2013; Jiang, Quiang and Lin, 2016). Given the magnitude, hydroelectric plants operate with a number of agents distrib- uted by different areas such as energy generation, environment, and large-scale engineering projects, among others. Hydroelectric ventures, in their vast majority, promote sustainability actions with the support of local agents (groups of stakeholders). These are actually groups of interest which will be impacted by the activities developed by these ventures, as is the case of local business, fishermen, indigenous groups, river- side agriculturists, and other farmers (Brazil, 2015a). The multiple interactions point out to some interesting research possibilities. * Corresponding author: Fabricio Baron Mussi, e-mail: fabricio_mussi@hotmail.com Abstract: Research Question: This paper sought to present a proposal for the analysis of the cooperation between a hy- droelectric power plant and the fisheries community. Motivation: The use of economic experiments on the sustainability theme has been employed by adapting public goods games to the different realities faced by the players. For this research, focused on the environmental preservation, preferring to contribute/not to contribute to their preservation consists of public goods dilem- mas. This subject also constitutes a research opportunity, since in the preliminary literature review few studies addressed con- comitantly the sustainability question related to hydroelectric plants and the cooperation between them and a group of local stakeholders. Idea: The core idea of this paper was to bring a proposal of association between the behavioural economics and crowding out theory to the analysis of actions envisaging sustainability, which demand the cooperation between a hydro- electric power plant and the fisheries community that make a living out of its reservoir. Data: The research was conducted as- sessing documents such as Itaipu´s annual sustainability reports and other documents between the plant and its stakeholders, in the environmental area, and in the form of contracts and cooperation agreements. Next, eight personal interviews were con- ducted with managers involved in the Sustainability Programme. Tools: With these information, the suggested public goods game was adapted from Fehr and Gachter (2000), and Sefton, Shupp and Walker (2007), and – for the present proposal of experiment – was named ‘reservoir game’, as the public goods in this case is Itaipu´s plant reservoir. Findings: This study can help in the acquisition of relevant information about the applicability and efficiency of punishment and reward mechanisms re- lated to cooperation, either in support of future negotiations and agreements or in bargaining situations when groups present their demands. One can only hope to have also contributed to the improvement of management of contractual agreements between corporations and local stakeholders in projects targeting sustainability, to reduce any transaction costs, and minimize the possibilities for conflict and disagreement between partners. Contribution: This paper expands existing research related to cooperation between a power plant and its local stakeholders. Keywords: Public goods game, mechanisms of punishment and reward, sustainability, hydroelectric power plant, fish- ermen JEL Classification: C93, Q01, L90 Moreira et al. (2015) and Jiang, Quiang and Lin (2016) observed that the themes related with the issues hy- droelectric plants face – among which those on environmental management and sustainability – have be- come more attractive than the transformation technology itself, and that there is an interdisciplinary trend in research. Many of the projects addressing these themes are performed by the joint action of the interested parties (Bond et al. 2016; Soest, Stoop and Vyrastekova, 2016; Lin and Liu, 2016), guided by arrangements in the form of contracts, partnerships, or cooperative agreements, and the success of some of these initia- tives require the involvement of two or more groups, and – sometimes – the results can only be checked in the medium and long term (Jin and Bai, 2011). Since it is not always possible to carry out an immediate evaluation of the results of cooperation, Albers (2010) suggests the adoption of coordination, control, and incentive mechanisms with a view to adjusting the parties´ behaviour. Among the types of incentive, the use of reward or punishing mechanisms stand out as instruments capable of motivating those involved in cooperating (Sefton, Shupp and Walker, 2007; Egas and Riedl, 2008; Balliet, Langer and Mulder, 2011). On the other hand, some studies indicate that the use of external incentives can compromise the intrinsic motivation of those involved (Vollan, 2008; Narloch, Pas- cual and Drucker, 2012). In this scenario, some research strands may be useful in evaluating these interac- tions, such as the behavioural economic game theory, and the crowding out theory, offering subsidies to help us understand how such groups make their decisions, and particularly how they choose to cooperate (Car- denas and Ostrom, 2004; Sturm and Weimann, 2006; Lozano, 2007; Soest, Stoop and Vyrastekova, 2016). In the context of this research, focused on the sphere of sustainability and environmental preservation, pre- ferring to explore/not explore non-renewable resources, or contribute/not to contribute to their preservation, consists of dilemmas on public commodities, once “the public resource dilemma is highly focused on in today’s global society, because it determines how long we will hold those necessary resources for the sus- tainable development” (Du, Wu and Wang 2016, p.1432). Faced with the difficulties of reconciling different stakeholder interests, as regards local contribution, opportunities for local development, reduction of envi- ronmental risks, private interests, and other such tensions between the Corporation and Society (Porter and Kramer, 2006), the contributions of these two theoretical strands as a mechanism for future negotiations, bar- gaining, and contract improvements needs to be envisioned. It is argued that recognizing the determinants weighing on the decision-making process of these groups to cooperate and trust can be deemed funda- mental, particularly in moments of negotiation and bargaining among the involved, as well as providing in- formation for the improvement of contractual instruments establishing the relationships between stakeholders and the Plant, and to minimize the possibilities of conflict and mismatched expectations between all involved. This subject also constitutes a research opportunity, since in preliminary literature review few studies ad- dressed concomitantly the sustainability question related to hydroelectric plants and the cooperation be- tween them and a group of local stakeholders, based on behavioural economics and crowding out theory approaches. The present study hence seeks to bring a proposal of association between two areas of re- search still poorly integrated – the contributions that behavioural economics and crowding out theory can bring to the analysis of actions envisaging sustainability, which demand the cooperation between a hydro- electric power plant and the fisheries community that make a living out of its reservoir. The use of economic experiments on the sustainability theme has been employed by adapting public good games (both in the form of voluntary contribution mechanism and common pool resources) to the different realities which the players actually face. Usually, the themes are focused on environmental preservation and control of scarce natural resources. We can name the forestry game (Cardenas, Janssen and Bousquet, 2013; Janssen et al., 2012); the water irrigation game (Janssen et al., 2012; Cardenas, Janssen et al. 2013); and the fishery game (Castillo et al., 2011; Emery et al., 2015). Considering the above, the problem of this research can be described as follows: how can behavioural eco- nomics, through the use of incentive mechanisms, contribute to assessing the intention of cooperation and the effect of crowding out between a hydroelectric power plant and a group of local stakeholders in projects favouring sustainability? The text begins with the literature review, followed by the construction of a proposal, after which our closing considerations are presented. 2. Theoretical Review 2.1 Sustainability and energy It is recognized that corporations cause impact in the surroundings of their operation, and that cautionary attention to these impacts becomes absolutely necessary, particularly in the social, economic, and envi- ronmental spheres. In this context, much has been discussed about the need for corporations to address 72 Fabricio Baron Mussi, Ubiratã Tortato 2018/23(2) the subject of sustainability, not only as an accessory matter, but incorporating it on strategic decision-mak- ing processes (Engert, Rauter and Baumgartner 2016; Moreira et al., 2015), either to mitigate/avoid social and environmental impacts, to explore new markets, or to reconcile the interests of various stakeholders (Zijp et al. 2015; Morrison-Saunders et al., 2014). These latter authors maintain that this perspective envisages a better understanding of sustainability assessment processes, transparency, and – particularly – the poten- tial way of obtaining consensus. In the energy sector, it is noted that many ventures sometimes delay their operation due to disagreement be- tween stakeholders, particularly regarding the release of environmental licenses, and clashes with local com- munities (Brazil, 2015a). Despite these obstacles, this sector is considered fundamental for the functioning of mostly all other sectors in economy, so that the availability of energy conditions the capacity of a country to provide several services to its population, and for it to prosper economically (Yüksel, 2010; Mayumi and Tanikawa, 2012; Purwanto and Afifah, 2016). In this respect, the global energy demand rises more slowly than in the past but still should expand by 30% between 2017 and 2040 (International Energy Agency, 2017). 2.2 Hydroelectric power plants Jiang, Quiang and Lin (2016), and Han et al. (2014) found, from the bibliometric studies, that (i) most re- search is linked to a period following construction and start of operation, rather than to construction proj- ects and technologies; (ii) the themes are multidisciplinary; (iii) there is a fast and rapid growth of publications on hydroelectric power plants. The argument is the relevance of hydroelectric power plants as a source of renewable energy, and its relative low-cost, when compared to other potential power sources (Liu et al., 2013). The benefits of using these plants when compared to other sources, is pointed out by (Yüksel, 2010; Liu et al., 2013): • Extension of flooded areas in some regions; • Efficiency of energetic conversion, due to low-cost operation and technology already in place; • Low maintenance costs; • Major input (water) is not subject to fluctuations due to market changes; • Possibility of flexible operation in power generation; • Capacity to promote improvement in the living conditions of local communities surrounding these large plants; • High level of reliability. In Brazil, such has been the main source of power supply, besides thermal plants, wind-power plants, small hydroelectric plants, and nuclear power plants (Brazil, 2015a). Moreira et al. (2015) state that the growth rate of the energy sector in Brazil is 4% / year, considering the increased participation of other energy sources in the Brazilian energy matrix. Compared to the other countries of the emerging economies, there are some differences: coal-fired power plants still represent the main source of power supply in South Africa, China and India, while in Russia natural gas thermoelectric plants are the most used (Brazil, 2015b). Due to the size of these projects and their impact on the environment, the actions toward sustainability pro- posed by the hydroelectric plants are often under debate. Most of these actions include economic, social, and environmental evaluations (Liu et al., 2013): local impact, the constraints that these projects may oc- casion in ecosystems and local communities, changes to the dynamics of the aquatic and terrestrial habi- tat and the deposit of sediments in river beds are all considered, among others (Yüksel, 2010; Zhao et al., 2012). In the words of Jiang, Quiang and Lin (2016, p.235): Hydropower will orient the development strategy of renewable energy due to its huge development potential, economic and social benefits and proven technology. However, we cannot omit the nega- tive impacts brought by hydropower projects in terms of environment, ecology and socio-economy. In Brazil, there are some plants with a huge power-generation capacity. Among the largest, we can mention Itaipu Binational (14,000 MW), Belo Monte (11,233 MW), Tucuruí (8,370 MW), and Jirau (3,750 MW) (Brazil, 2015a). Given the particularities of the country in terms of availability of hydric resources, the main topics of discussion are: (a) reduction of local and global impact arising from the use of energy sources; (b) use of re- newable sources; (c) minimization of impact on the environment; (d) discussions, at the national and interna- tional level, on climate change. Regarding socio-environmental themes, the following topics can be mentioned: (a) environmental impact: loss of native vegetation; transformation of a lotic environment into a lentic one (run- ning waters into dammed waters, creation of reservoirs), loss of vegetation; (b) social-economic impact: af- fected population; interference in indigenous lands; (c) interference in infrastructures; (d) socio-economic benefits: job creation, temporary increase in tax-collection, permanent increase in tax-collection. 73 Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2018/23(2) There are several bodies involved in the decision-making process in the power generation sector, each bringing to the table their own interests and responsibilities. The following table summarizes the main stake- holders in the sector: Table 1: Main stakeholders in the sector Source: Adapted from Moreira et al. (2015). On the whole, many of the actions developed in the scope of sustainability occur by means of the interac- tion between power plants and their surrounding environment. At this point, we would add that under- standing the evolution of cooperation among individuals and groups is still an interdisciplinary challenge (Perc and Wang, 2010), and behavioural economics can contribute to this endeavour. 2.3 Behavioural economics, the crowding out effect Behavioural economics consists of a fairly recent field of research deriving from the incorporation of eco- nomics, theoretical developments, and empirical findings in the fields of human and social sciences (Weber and Dawes, 2005). Among the possibilities of contribution of this theoretical strand, we can mention be- havioural economic experiments, and the public goods game in particular (Sturm and Weimann, 2006; Lozano, 2007; Soest, Stoop and Vyrastekova, 2016). The public goods game consists of an experiment in which the agents receive a certain amount of money and can contribute with the purpose of maintaining public goods or taking the money for themselves (for personal benefit), being that no agent can be excluded of enjoying the benefits the public goods offer. The donated value usually doubles (or is multiplied by another pre-established index) and redistributed equally to all players, independently of their individual contribution. The game presupposes the existence of an in- dividual or group dilemma and the possibility of contributing/not contributing but still being able to use the public goods (Sell et al. 2002; Soest, Stoop and Vyrastekova, 2016). The payoff represents the linear func- tion of the contribution of the subjects, and therefore the aggregated returns are maximized if each subject invests all his patrimony in a public good, so that the amount contributed to the public account represents a measure of the participant´s cooperativity (Cardenas and Carpenter, 2006). However, the self-reward max- imizing strategy in this game is to pocket the donation independently of the amounts contributed by the other members of the group (Soest, Stoop and Vyrastekova, 2016). This behaviour adopted by a subject, to maximize the use of the public goods without contributing to the provision of the same is recognized as free riding (Andreoni 1988; Sturm and Weimann, 2006). Some authors argue that the public goods game consists of a feasible possibility to evaluate the willingness of the participating agents to cooperate with a view to sustainability (Lozano 2007; Soest, Stoop and Vyrastekova, 2016; Robert and Broman, 2017). Still, a strand of studies on cooperation argues for the need to consider local collective construction of solutions to specific environmental issues (Frey and Stuzer, 2006; Vollan, 2008). Cardenas, Stranlund and Willis (2000) and Cardenas and Ostrom (2004) analysed the effect of governmental intervention to regulate wood extraction in Colombia. Recognizing that the extraction of this 74 Fabricio Baron Mussi, Ubiratã Tortato 2018/23(2) ������� ���� � ���������� ������� �������� ���� �� �� �� ������ ���������� ��� ���������� �� ��������� ���� ������ �� ��� ���������� �� �������� ��� ��� ����� �������� �������� ���� �� ������� ��� ��� �� ������ �� ���� �� �� �� ����� ����������� ���������! �������� �� ��" � �#����! �������� �� ��� �� ��� ����� �� �� ���� �� ������ ����������� �� � ��������� ������� �� ��" � �#���� �� ��� � �� $���� ���� ����� ����� � �� ����� � �#���� �� ������� �� ������! ���� ��������! ��� �������� ������! ����� � ������ "��� ��%&����������' ���(������ � ��� ������� � )�(� ���� ��������� ����� �� ��������! ������! ��� ���� �������� ��� ������� ������� �� ��� �� (��! ��������� ��������! ��� ���� ���(������ �' * ������� +�������� �� ��� ��� ������ ��� ���"���� ���� �� ���� ��� ��� ���� ����� �������� ���������� ��� ���������� �� ��� ���� �������� ���� ������ �� ��� ���������� �� �������� ��� ��� ����� �������� ������� +���������� �� ����� � ������ �� ��������! ������! ��� ���� �������� ������� ��� �� ������ �� �� ����� ������! ����� �� �� �� ������ ��� ������������ � ���� �� ����� ���! ��� ���� �� �� �! ��� ��#����� �������� material accelerates local erosion, the authors – considering the neoclassic economic theory – hoped that reg- ulation would bring better results to local groups. Nevertheless, they discovered that when the extraction was marked by informal norms defined by the residents themselves, the decision to extract was balanced be- tween selfish and collectivist behaviours. From the moment the government took over this responsibility, the residents no longer felt co-responsible for the extraction, adopting a more egocentric posture. Comparatively, both transaction cost theory and agency theory consider monitoring and surveillance to raise partner´s efforts, while the literature on the crowding out effect suggests just the opposite (Dickinson and Villeval, 2008). Frey and Jegen (2001), and Fehr and Falk (2002) reinforce this finding, stating that in- dividuals can reduce their willingness to cooperate when threatened by sanctions/punishment, or even by economic incentives and rewards. 2.4 The role of reward and punishment mechanisms In order to encourage cooperation between individuals, some authors suggest the use of reward mecha- nisms (for cooperation) and punishment (for non-cooperation) as tools to promote cooperation in social dilemmas or situations when immediate self-interest and longer-term collective interest conflict (Balliet, Langer and Mulder, 2011; Choi and Ahn, 2013). The reward mechanisms, from the perspective of the public goods game, consist of an artifice used to pro- mote cooperation between the parties, being effective in games of more than one round (Walker and Hal- loran, 2004), and when the cost of promoting it is lower than the benefit of the recipient (Sefton et al., 2007), being recommended the use of this instrument individually (Narloch et al., 2012). For the latter authors (2012, p.2014): “by raising the individual pay-offs and decreasing free-riding incentives, individual rewards could have a stabilizing effect on collective action due to motivating people to stick to the social norm”. As with the agency theory, it is suggested that the partner is motivated by the financial returns from the interactions, so that the higher the return, the greater the likelihood of the agent to adopt a cooperative posture (Dickin- son and Villeval, 2008). The following table summarizes some of the results related to rewards in the public goods game: Table 2: Synthesis of the studies addressing rewarding in public goods games Source: Prepared based on the literature review Regarding punishment mechanisms, Reuben and Riedl (2013) broaden the discussion about contributions to a public good, indicating that differences in contribution stem from the forms of punishment imposed, so that when there is no punishment, all involved converge to the free riding behaviour. Regarding this finding, other authors (Masclet et al., 2003) have also observed that when the punishment is monetary, offer in- creases more than when the punishment is non-monetary. Meanwhile, for both possibilities, when the pun- ishment is removed, the contributions decrease in the public goods game. 75 Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2018/23(2) ������� � �� �� ����� �� �� �� �������� ���� ����� ��� �� ��������� �� ���������� ��� ��������� ��� � ����� ��� ������� ���� ��������������� ����� !""#$��%��� ����&���������� ' ����� !"(($� ) ����� ������� �� � � ��� �������������� �� ��� �� ������� ��) ����� ���������� �� ������� �������������� � ��� ���� � ��� ��� ��� *���� �� ����� � � ���������� �������� ��������������� � �� � ������ *���� ���� +���,�������-� !"(($�� .������������-� !"(($�� /��� ���0��� ������� 1� ����� !"(!$� ����������* �������� �� � ������ *��������� �� ��� ��������� ��0 � � �������� *���� ��������� ���������� ������ � *���� ���2���� ��� ���2��� ��������� ��� �� �������� ��� ������ *��� �2�����* �� 2���� ��� ���� ��� � ���� ����� ���� ���������� ������������ � ������� *���� �� .������������-� !"(($� / ��� ��������������3� � *���� �� ��.����3*�� ����� ��2� ���*�� ���� � � ���������$� � ���� �������� � ���������� *���� �� ��������3�� � ��� 4 ������� !"(5$� � 6� ���������3�� *���� �� ��������������������������� ���� ��������(7(������ ������������� ��� ��� ����*�2��� ���� ��� � ��� � *���� �������������� ������� �2��� ��� ���� ��������������� ���� !""#$��8��� ���8� **����� ������� !""9$� 0 � � �����������3� � *���� �� ��0 � � ����������� (7:$�*� � �������� ����� �*���� ��� *���� ������� � ��������������� ����������� �*���� ������������� ��� �� � ����� �� � *���� ��� ��� ��� ��� ������� ���� ;���� � �����2� ������� <������ ��� !""5$�� <������� �������8 ���� !""=$� While the prediction of punishment in contractual arrangements is interpreted as a mechanism of preven- tion of opportunistic behaviours (Willianson, 1985), in experiments of public goods game, it is observed as the prediction of punishment as a mechanism envisaging to ensure efficiency/contribution of the good (Fehr and Gaechter, 2000; Sefton et al., 2007) penalizing those who choose not to cooperate, although they can still enjoy that specific public good. In this context, we can observe some authors´ reserve in what concerns the magnitude of the punishment, recommending that – to be effective – punishment should be high, in a proportion 1:3 or even higher (Sefton et al., 2007; Nikiforakis and Normann, 2008; Chaudhuri, 2010): the mere prediction of a punishment, or a punishment with minimal loss to the player, would not be effective to cooperation. It should be noted that the use of this resource is recommended, making the application of punishment low-cost to the punisher, and of high impact to those punished (Carpenter, 2007; Egas and Riedl, 2008; Nikiforakis and Normann, 2008). The following table synthesizes some of the main findings regarding punishment mechanisms in public good games. Table 3: Synthesis of the studies addressing punishment Source: Prepared from the literature review. 76 Fabricio Baron Mussi, Ubiratã Tortato 2018/23(2) ������� � �� �� ����� �� �� �� ��������� � ���� � � ���� ����� ���� ����� � �������� ���� ���� � �� ���� ��� ���� � ����������� ��� ��������� ����� ��������� �� �������� �� �� � ��������� ��������� �� ��� � !!!"# $��� ��� %��� � !&'" $�������� �� ���� � (�� ��������� �� ������ ��� ���� ����� �� � �� ���������� ��������� ����)�� � �� ��� ���� ��� ��� ���� ������ �� ��� ���� ���" �� ��� ����������� �� �� ���������� *�� ��� +���� � !!,"# -�.� ���.� ��� -������ � !!," +����� � ��� ���� ��� ������ /��� � ���� ��� ������ ������ ��� ��� ������� �������� ����������� ���� �� ��� ��� � ��� -�.� ���.� � !!0" ���������� ��������� ��� ���� ����� /��� ��� ���������� � ���� ������ ��������� ��������� � ��������� 1��� ��� 2������� � !!!"� 3������ ���� ��� ��������� � !!4"# 5� ��� �� ��� � !!6" 1���)��) ��� ������������� � � ���� ����� $�������� ��� � ������� � ���)��) ��� ������������� ���� ��������� ���� ������ �� ��� �� ���� ���� ������������� ������ � ������������ ���� ���� ��� �� ������� �� ���� �� ��� ��� ������� ��� �� � � ���� ����� ���� ������������� ���� ������� ������ � ��� ���� � ���������� ��� ��� ����� 3������ ���� ��� ��������� � !!4" $���������� ����������� $���������� ����������� ������� ��� � ��� ������� �� ���� � ����� ������� ���� � ����� � � �� � ��� �� ��� ��� ��� �� ����)���� ���� �� 1��. �� ���� � !!7"# 28������ 28����� �� ��� � !!," * ������� � � ���� ����� ) 3��� ������������ � ������ ��� � ������� � � ������ ���� ��� ������ ���� ���� ����� � ������� ���� ���� �� � ��� ��� ���# ) /������ ��� �� ������� � ���� ������ 9� � � ��������� ����� � ����� ��� ��� ������� ���� ��������� ��������� ��� � ��� ���� ������ � ���� ���� +��.������ ��� :���� .� � !!4"# +����� ��� +���� � !&'" ���� ����� � � ������ � ����� ;� ����� ����� ���� � ���� ����� �� �� � ��� /��.�� ��� <������� � !!0"# 28����� �� ��� � !!," :�������� � ���� ����� � � ����������� ) /��� ���� ����� � ���� �� �� &=&" �� � ��� � ������ �� ����������� �����������# ) (� �� ��� ����� � �������� ���� ����� �� � �� ���� �&=0" 5� ��� �� ��� � !!6"# -�.� ���.� ��� -������ � !!,"# $�������� � !&!" 5�>� � ��� ����� � � ���� ����� /��� ��� ���������� � �������� ��� �>� � ��� ����� ���� �� ������ � ������������� ��� ������� ������ ���������� � ����������� $�������� � !!6" $� � � ���� ����� ;����� � �� ���� ����� ������ � � ��� �� � � ���� ����� ������ � � � �� ��� ��� � ����� ��� ������ %���� �� ��� ��������� � !!4" 5����� ���� ����� � � ���� ����� ���� ����� ;� ��� �� ������� � ���� ��� ������� ���� ���� ����������� �� ��� � ��� ���������� ���� ����� �������� ���� ���� ����������� � ��� �� <������ �� ��� � !!,"# *���� �� ��� � !!?" ���� ����� � � �������� ������� ���� ����� � �� � ������� �� �������� ���� ������� ��� ������������ ;� �������� ���� ������� � ������� ����� � ������������ ���� ����� ���� �� ������ ��� ������� ���������� � !&4" -��)�������� ���� ����� ) -��)�������� ���� ����� ��� ������ � ����������� �� � ������� ������ � ����# ) (�� � ���� ����� ��� ���� � ������ ����� ������ ��� .��� � ������ ���� ���� ������� # ) 3��� ��� � ���� ����� ��� ���� � ������ �� ����������� ���� ��� ������ ��� ���� ����� �� ���� :� ���� �� ��� � !!'" In view of the above, in order to propose contributions of incentive mechanisms to cooperation in the field of sustainability for a specific group of Itaipu´s stakeholders, as well as evaluate the manifestation of the crowding out effect, it is necessary to glimpse on how such motivations and collective constraints associ- ated to incentives aimed at environmental preservation affect individual decisions to contribute to the pub- lic good. 3. Methodological Procedures and Construction of The Proposal for Applying The Public Goods Game The proposal for the integration of the themes is illustrated here in the form of Itaipu hydroelectric plant and its particular Sustainability Program. The choice was intentional, once the corporation is considered to be the largest power generating hydroelectric in the world, with its sustainability program in force for over a decade, being internationally recognized for its contribution to the socio-economic development of the West- ern region of the Parana State, and for its water management and conservation practices. The operation of this plant began in 1984. Its reservoir is 170km long, and 20 power units generating 700MW each were in- stalled. This is a binational hydroelectric power plant (Brazil and Paraguay), and this research was con- ducted only on the Brazilian side. Another criterion for choice was that their programme has several fronts of interaction with groups of local stakeholders. The following table presents the generation of energy for the last ten years. Table 4: History of power generation at the Itaipu hydroelectric power plant Source: Elaborated through data collation The research was conducted assessing documents such as Itaipu´s Ten-Year Energy Plan (Brazil, 2015a), the plant´s annual sustainability reports, and other documents between the plant and its stakeholders, in the environmental area, and in the form of contracts, service permits, partnerships, and cooperation agree- ments. The purpose was to contextualize the main initiatives aimed at environmental preservation that re- quire participation of the community of professional fishermen using the reservoir, the timeframe of these relationships, types of results expected, and whether the participation was a demand from the stakehold- ers. We are discussing a population of 456 professional fishermen, divided by 10 locations/fisheries asso- ciations. The following figure shows their distribution along Itaipu´s reservoir. Figure 1: Distribution of professional fishermen along the reservoir 77 Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2018/23(2) ����� ����� ����� ����� ����� ����� ����� ��� � ��� � ����� ����� �� � � �� � � �� � �� � �� � ���� �� ��� �� ��� �� ���� �� �� � �� � � ��� �� � �� ���� � Next, eight personal interviews were carried out with managers involved in the Sustainability Program, guided by a semi-structured script of qualitative questions (Godoy, 2006) – whose contents included the validation of the researcher´s findings from the examination of secondary documents, as well as the explanation re- garding the fishermen of the Western region of Parana identified as relevant to the power plant, the partic- ularities of each project developed, and the risks of possible non-cooperation. The questions also explored topics related to management of relationships, determinants and obstacles. The understanding of these questions was relevant to initially propose the field experiment in the form of public goods game. Subse- quently, it will also support the definition of the experiment protocol to be used with fishermen. The suggested public goods game was adapted from Fehr and Gachter (2000), and Sefton, Shupp and Walker (2007), and – for the present proposal of experiment – was named ‘reservoir game’, as the public good in this case is Itaipu´s plant reservoir. The option stems from the fact that the Itaipu reservoir provides the input used to generate the energy that supplies approximately 17% of the energy in the whole of Brazil. Besides, this reservoir serves many purposes for the region population: it serves as the source of water for the household consumption, for agriculture and livestock; as a tourist attraction; and as a source of sub- sistence for the fishing activities in the region. The proposal for this game consists of conducting the experiment with groups of six players each. With each round, the players must receive 2 envelopes and 10 coins of R$ 1 each, choosing how many coins to allocate to a ‘public account created for the preservation of the reservoir’ (first envelope), and how many coins to allocate to their respective ‘private accounts’ (second envelope). Unlike the allocation of coins to the in- dividual account of each player, those donated for the reservoir preservation are summed, and right after mul- tiplied by 2 (representing the benefits resulting from the preservation of the reservoir) and redistributed equally among all players, to illustrate the characteristics of a public good (non-exclusive and non-compet- ing). The results should be presented in a projector, round by round, so that each player can take note of their gains, and the gains of the other players. After 6 rounds, the possibility of one player punishing or rewarding another must be introduced. For this se- quence (another 6 rounds), an extra envelope must be handed out. In this envelope the player writes the number of the player he/she would like to punish (or reward) and with how many coins. In addition to the rest of the rules, for each coin the player uses to punish (or reward), the punished player loses (or receives) 4 coins, representing a high punishment (or reward) as suggested in the specialized literature (Sefton et al., 2007; Nikiforakis and Normann, 2008; Vyrastekova and Soest 2008; Reuben and Riedl, 2013). At the end of the 6 rounds, there should be a draw for each player and – in that lot – the player would keep all the money. It can be said that experiments of this nature, in turn, test hypotheses related to the free rider behaviour and the selfish choice (Soest et al., 2016) of the players as a presupposition of neoclassical economics; the role of the mechanisms of punishment and reward to ensure efficiency of public good in cooperation (Fehr and Gaechter, 2000); and the potential changes to cooperative behaviour (materialized in donations) resulting from the institution of penalties or rewards, i.e., whether the sustainability of the Itaipu´s plant reservoir rep- resents a motive good enough to favour cooperation on its own (Bowles and Reyes, 2013). 3.1 Selection of players and definition of games The criteria for identification and selection of potential players in this proposal was based on the identification – among those groups belonging to the local society – of those who frequently interact with the power plant. These are stakeholders with frequent interface relationships, particularly with the area of environment and environmental management. The following was also considered: • That the fishing community has – direct or indirect – contact with some contractual regiment. This point constitutes an attribute for cooperation: when the participants themselves agree to a work order and a punishment system, it is often not necessary to use it, and the benefits of cooperation can be substantially improved (Ostrom, 2010); • That the fishermen represent a group of interest mentioned in Brazilian electrical sector official doc- uments (Brazil, 2015a) and in continual assessment for the construction of economic, social, and environmental indicators (IHA, 2006; Morinoto, 2013; Dombi et al., 2014) for hydroelectric plants; • That from the suggestion of the criteria for classification of stakeholders, relation of dependency (Langtry, 1994) and of legitimacy in the relationship (Cornell and Shapiro, 1987; Carrol, 1989) of the professional fishermen to the power plant were observed; 78 Fabricio Baron Mussi, Ubiratã Tortato 2018/23(2) • That these are mostly low-income groups whose decisions that may benefit them in the short-term may overlap with long-term cooperation decisions, albeit to the detriment of sustainability and con- tractual regiment. On the other hand, the imposition of external incentive mechanisms may under- mine motivation of these groups to preserve the referred public good; The follwoing table characterizes the stakeholders identified from the data collection. Table 5: Characterization of the fishing community Source: Prepared based of the literature review. From the characterization of these groups, the sustainability projects that showed interaction were duly identified, and hence the public goods game was proposed, as the best way to represent the dilemma faced by the groups, particularly as regards the public good notion. Regarding the type of game, the details on the gains for cooperation were proposed as follows: Table 6: Sustainability project with which the interest group has an interface, and proposal of economic games Source: Prepared from data collection Checking willingness to cooperate in actions geared to sustainability, as well as examining the role of pun- ishment and reward mechanisms is relevant for the corporation to obtain subsidies for the establishment and maintenance of long lasting relationships with these interest groups. For this, the possibility for communi- cation between those involved (particularly direct, face-to-face communication), the long-term horizon of re- lationships, and the reputation of the power plant can represent factors that support stakeholders´ motivation, which in turn raises the chances for cooperation between all parts involved (Ostrom, 2010). 79 Management: Journal of Sustainable Business and Management Solutions in Emerging Economies 2018/23(2) � ������� ��� ����� ����������� ������� ����� ���� ������������ ���� ������������� ���� ���� ����������� ������ � �� ���� � � ���� ����� �� ���� � ������� ���������� �� � � ������������ �� � ����������� ������ �� ������������� ��� �������������������� ������ ����� �������������������� ��������� ��� ���� �� � ����� ������ ���������� �� �������� �������� ����������� �� �� �� ������������� � ����� �������� ������ �� �!�� ����������� ���� �������� �������� ��� ���� ��� � ���� ����������� �������� ����� � ��� � ������� ������������������� �"��� ���� ��� ����� � ������� ������������ ���� ����� �������"���� ��������#���������������������� � � ��� � ��������� � ��� ������������ ��$ � ������ ���� � "����� ������������"����������� ����� ������ � ���� ��� ������ �� ����������������� ������������ ��%��� �� ������ ��� ���� � �� � � � ��� �� �� ����� �� �� �� ������� ����� ������ � ��� �� �� ��������� ����� � ���� �� ����������� ����"���������� ������� � "������ ��������� �� �������� �� ���������� ���� ����� � ������� � ���������� ���� ��� ����� � ������������ �������� � ���� ����� � ���� ���� ��������� ��& �� � ��� � ������������ ���� ������ �� ������ ���� ��� � � ����������� �� � ��� ���� �������� ������ ����� �� �������� � � �� �� � � � � �� � � � �� �� ���� � ����� � � ��� ������ ��� � � �������� � � ���� � � ��� ������ ��� � � �������� � � � ������ � ������� �� � ��� ������ ��� � ��� ���� � ���� � �� � � �� ����� � ��������� � ���� � � ��� � �� ���� �� � �������� � � �������� �� � � �� � � ��� �������� � ���� � ��� � ��� ���� ������� �� � ����� � � ������ � � ������ � � � ���� ��� �������� ��� ����� � � ��� ��� ��� ������ � �� ��� � ��� ������� � � ��������� � �������� �� ���� ����� �� � ��� �� � � ���� ������� �� ��� � ������ ��������� � ��� �������� ! � � ���� � "# � � �� �$ � � � �� �� � � $ � � ������� ��� ���� �� %����� � ��� ��� ! ���� ������� � � ����� �� � �� ����� ���� ���� �� �� � � ��� � � ��� ���� � � ���������� � ��� ������ ��� � &��� � � ����� � �� ���' ( �� �� � $ � ��������� ���� �� ����� �� ���� �� � ��� ����� ) ����� � � ����� �� ������� ' 4. Final Considerations The present study sought to present a proposal for an association between two areas of research still poorly integrated – the contributions that behavioural economics and crowding out theory can bring to the analy- sis of actions envisaging sustainability, which demand the cooperation between a hydroelectric power plant and the fisheries community that make a living out of its reservoir. It can be added that most research, based on the application of economic experiments, focuses on two aspects: • Analyzes decisions targeting cooperation in public goods based on a dummy scenario – created in university laboratories – predominantly with the participation of students (Weber and Dawes, 2005; Houser et al., 2012; Dannenberg, 2016; Boosey, 2017); • Analyzes decisions targeting cooperation based on field experiments in rural communities (Car- denas, 2000; Cardenas and Ostrom, 2004; Henrich et al., 2005; Vollan, 2008; Narloch et al., 2012), envisaging the understanding of the dynamics of cooperation between these groups, as well as the factors that may interfere in this dynamics. In this case, research generally involved a combination of (qualitative and experimental) methods, making use of specific control variants, and – some- times – considering specific contexts in which these communities exist, in terms of social norms, restriction of resources, forms of subsistence. The present proposal is embedded in this latter cur- rent, and can be synthesized as follows; Table 7: Experiment proposal Source: Prepared by the author, based on specialized literature It is recognized that economic field experiments lose part of their internal validity and potential for replica- tion when compared to laboratory experiments (Roe and Just, 2009). However, to approach the reality of local organizations and identify the heterogeneity of the stakeholders with which the hydroelectric power plant interacts represents a relevant aspect to be considered in decision-making about cooperation (Chakravarty and Fonseca, 2014). Still with respect to the proposal of use of economic behavioural experiments, it is justified due to the na- ture of the information one wishes to obtain, which can hardly be obtainable by means of performing pre- dominantly qualitative studies, or by exclusively applying questionnaires. Cardenas and Carpenter (2006), for example, recommend the adoption of this procedure to evaluate issues related to decision-making of agents and groups, especially on matters related to preferences, risk, and willingness to cooperate. Due to this methodological option, it is important to observe the need to strictly comply with the protocol of ma- nipulation of variables and the operationalization of the experiment itself. This involves specific procedures in the recruitment of potential participants phase, explanations, and stimuli prior to the game, game con- duction, and even a follow-up to the experiment (Kreps, 1990; Henrich et al., 2005; Cardenas, 2000; Car- denas and Carpenter, 2006; Howe et al., 2016). The current proposal finally wishes to contribute to the refinement of research on hydroelectric power plants stakeholders´ willingness to cooperate, representing a still on-going development of an opportunity for re- search on this theme. From a practical standpoint, this study can help in the acquisition of relevant infor- mation about the applicability and efficiency of punishment and reward mechanisms related to cooperation between a power plant and its local stakeholders, either in support of future negotiations and agreements or in bargaining situations when groups present their demands. One can only hope to have also contributed to the improvement of management of contractual agreements between corporations and local stakehold- ers in projects targeting sustainability; to reduce any transaction costs, particularly in long-term relation- ships; complement the contents of contracts, drafting obligations/duties of the parties involved, applicable penalties and incentives for contractual compliance; and minimize the possibilities for conflict and dis- agreement between partners. 80 Fabricio Baron Mussi, Ubiratã Tortato 2018/23(2) Punishment and evaluation of crowding out effect Without punishment (control) With high level of punishment Reward and evaluation of crowding out effect Without reward (control) With high level of individual reward The conduction of similar studies in other power plants with recent impact on local communities, as is the case of Belo Monte power plant (Oliveira et al., 2016), and with other players can also aid to the validation of this proposal. 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DOI: 10.1016/j.renene.2012.01.005 Received: 2018-05-25 Accepted: 2018-06-30 Fabricio Baron Mussi Pontifícia Universidade Católica do Paraná, Brazil fabricio_mussi@hotmail.com Bachelor’s and Master’ degree at Business at Federal University of Parana and a PhD student at Business of Pontifícia Universidade Católica do Paraná. He is currently a contract manager at Itaipu Hydroelectric Power Plant. He has experience in Business, acting mainly in the following subjects: sustainability; economic behaviour; finances. Ubiratã Tortato Pontifícia Universidade Católica do Paraná, Brazil ubirata.tortato@pucpr.br Bachelor’s and Master’s at Business from Universidade Federal do Paraná and a PhD at Production Engineering from Universidade de São Paulo. He is currently a full professor at The Pontifícia Universidade Católica do Paraná and Chief-Editor of REBRAE. He has experience in Business, acting mainly in the following subjects: sustainability, SSCM, eco-efficiency, cooperatives and sustainable universities. << /ASCII85EncodePages false /AllowTransparency false /AutoPositionEPSFiles true /AutoRotatePages /All /Binding /Left /CalGrayProfile (Dot Gain 20%) /CalRGBProfile (sRGB IEC61966-2.1) /CalCMYKProfile (U.S. Web Coated \050SWOP\051 v2) /sRGBProfile (sRGB IEC61966-2.1) /CannotEmbedFontPolicy /Warning /CompatibilityLevel 1.4 /CompressObjects /Tags /CompressPages true /ConvertImagesToIndexed true /PassThroughJPEGImages true /CreateJobTicket false /DefaultRenderingIntent /Default /DetectBlends true /DetectCurves 0.0000 /ColorConversionStrategy /LeaveColorUnchanged /DoThumbnails false /EmbedAllFonts true /EmbedOpenType false /ParseICCProfilesInComments true /EmbedJobOptions true /DSCReportingLevel 0 /EmitDSCWarnings false /EndPage -1 /ImageMemory 1048576 /LockDistillerParams false /MaxSubsetPct 100 /Optimize true /OPM 1 /ParseDSCComments true /ParseDSCCommentsForDocInfo true /PreserveCopyPage true /PreserveDICMYKValues true /PreserveEPSInfo true /PreserveFlatness true /PreserveHalftoneInfo false /PreserveOPIComments false /PreserveOverprintSettings true /StartPage 1 /SubsetFonts true /TransferFunctionInfo /Apply /UCRandBGInfo /Preserve /UsePrologue false /ColorSettingsFile () /AlwaysEmbed [ true ] /NeverEmbed [ true ] /AntiAliasColorImages false /CropColorImages true /ColorImageMinResolution 300 /ColorImageMinResolutionPolicy /OK /DownsampleColorImages true /ColorImageDownsampleType /Bicubic /ColorImageResolution 300 /ColorImageDepth -1 /ColorImageMinDownsampleDepth 1 /ColorImageDownsampleThreshold 1.50000 /EncodeColorImages true /ColorImageFilter /DCTEncode /AutoFilterColorImages true /ColorImageAutoFilterStrategy /JPEG /ColorACSImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >> /ColorImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >> /JPEG2000ColorACSImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >> /JPEG2000ColorImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >> /AntiAliasGrayImages false /CropGrayImages true /GrayImageMinResolution 300 /GrayImageMinResolutionPolicy /OK /DownsampleGrayImages true /GrayImageDownsampleType /Bicubic /GrayImageResolution 300 /GrayImageDepth -1 /GrayImageMinDownsampleDepth 2 /GrayImageDownsampleThreshold 1.50000 /EncodeGrayImages true /GrayImageFilter /DCTEncode /AutoFilterGrayImages true /GrayImageAutoFilterStrategy /JPEG /GrayACSImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >> /GrayImageDict << /QFactor 0.15 /HSamples [1 1 1 1] /VSamples [1 1 1 1] >> /JPEG2000GrayACSImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >> /JPEG2000GrayImageDict << /TileWidth 256 /TileHeight 256 /Quality 30 >> /AntiAliasMonoImages false /CropMonoImages true /MonoImageMinResolution 1200 /MonoImageMinResolutionPolicy /OK /DownsampleMonoImages true /MonoImageDownsampleType /Bicubic /MonoImageResolution 1200 /MonoImageDepth -1 /MonoImageDownsampleThreshold 1.50000 /EncodeMonoImages true /MonoImageFilter /CCITTFaxEncode /MonoImageDict << /K -1 >> /AllowPSXObjects false /CheckCompliance [ /None ] /PDFX1aCheck false /PDFX3Check false /PDFXCompliantPDFOnly false /PDFXNoTrimBoxError true /PDFXTrimBoxToMediaBoxOffset [ 0.00000 0.00000 0.00000 0.00000 ] /PDFXSetBleedBoxToMediaBox true /PDFXBleedBoxToTrimBoxOffset [ 0.00000 0.00000 0.00000 0.00000 ] /PDFXOutputIntentProfile (None) /PDFXOutputConditionIdentifier () /PDFXOutputCondition () /PDFXRegistryName () /PDFXTrapped /False /CreateJDFFile false /Description << /ARA /BGR /CHS /CHT /CZE /DAN /DEU /ESP /ETI /FRA /GRE /HEB /HRV /HUN /ITA /JPN /KOR /LTH /LVI /NLD (Gebruik deze instellingen om Adobe PDF-documenten te maken voor kwaliteitsafdrukken op desktopprinters en proofers. 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