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Public Good and Private Good Valuation for Waiting, Time Reduction: A Laboratory Study

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  • Tibor Neugebauer

    ()
    (Luxembourg School of Finance, University of Luxembourg)

  • Stefan Traub

    ()
    (University of Bremen)

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    Abstract

    In a laboratory experiment subjects were endowed with money and waiting time. Preferences for waiting time reduction were elicited with salient rewards both as a private good and as a public good. The allocations of the public good that were theoretically predicted by the Nash equilibrium and the Lindahl equilibrium, respectively, were computed from the individual private good valuations and compared with the subjects’ actual contributions. We found a significant positive correlation between private good valuations in terms of willingness-to-pay and public good valuations in terms of voluntary contributions. Group contributions to public waiting time reduction significantly exceeded the non-cooperative prediction and were close to the socially optimal level. However, for a majority of subjects, the Lindahl equilibrium was not able to predict the observed contributions.

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    Bibliographic Info

    Paper provided by Luxembourg School of Finance, University of Luxembourg in its series LSF Research Working Paper Series with number 11-03.

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    Date of creation: 2011
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    Handle: RePEc:crf:wpaper:11-03

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    Keywords: Cartel Stability; Delegation; Relative Performance Evaluation;

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