The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence
AbstractThis study examines the performance of stable cooperative coalitions that form to provide a public good when coalition members have the opportunity to not comply with their commitments. A stable coalition is one in which no member wishes to leave and no non-member wishes to join. To counteract the incentive to violate their commitments, coalition members fund a third-party enforcer. This leads to the theoretical conclusion that stable coalitions are larger (and provide more of a public good) when their members must finance enforcement relative to when compliance is ensured without the need for costly enforcement. However, our experiments reveal that giving coalition members the opportunity to violate their commitments while requiring them to finance enforcement to maintain compliance reduces the overall provision of the public good. The decrease in the provision of the public good is attributed to an increase in the participation threshold for a theoretically stable coalition to form and to significant levels of noncompliance. When we abandon the strict stability conditions and require all subjects to join a coalition for it to form, the average provision of the public good increases significantly. Key Words: stable coalitions, self-enforcing agreements, compliance, enforcement, public goods
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Bibliographic InfoPaper provided by Department of Economics, Appalachian State University in its series Working Papers with number 08-10.
Date of creation: 2008
Date of revision:
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Web page: http://www.business.appstate.edu/departments/economics/
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Other versions of this item:
- David M. McEvoy & James J. Murphy & John M. Spraggon & John K. Stranlund, 2011. "The problem of maintaining compliance within stable coalitions: experimental evidence," Oxford Economic Papers, Oxford University Press, vol. 63(3), pages 475-498, July.
- David M. McEvoy & James J. Murphy & John M. Spraggon & John K. Stranlund, 2008. "The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence," Working Papers 2008-2, University of Massachusetts Amherst, Department of Resource Economics.
- David M. McEvoy & James J. Murphy & John M. Spraggon & John K. Stranlund, 2010. "The problem of maintaining compliance within stable coalitions: experimental evidence," Working Papers 2010-02, University of Alaska Anchorage, Department of Economics.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-CDM-2008-06-21 (Collective Decision-Making)
- NEP-EXP-2008-06-21 (Experimental Economics)
- NEP-POL-2008-06-21 (Positive Political Economics)
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