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On the Formation of Coalitions to Provide Public Goods - Experimental Evidence from the Lab

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  • Astrid Dannenberg
  • Andreas Lange
  • Bodo Sturm

Abstract

The provision of public goods often relies on voluntary contributions and cooperation. While most of the experimental literature focuses on individual contributions, many real-world problems involve the formation of institutions among subgroups (coalitions) of players. International agreements serve as one example. This paper experimentally tests theory on the formation of coalitions in different institutions and compares those to a voluntary contribution mechanism. The experiment confirms the rather pessimistic conclusions from the theory: only few players form a coalition when the institution prescribes the full internalization of mutual benefits of members. Contrary to theory, coalitions that try to reduce the free-riding incentives by requiring less provision from their members, do not attract additional members. Substantial efficiency gains occur, however, both along the extensive and intensive margin when coalition members can each suggest a minimum contribution level with the smallest common denominator being binding. The experiment thereby shows that the acceptance of institutions depends on how terms of coalitions are reached.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15967.

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Date of creation: May 2010
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Handle: RePEc:nbr:nberwo:15967

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  1. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
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  7. John A. List & David Lucking-Reiley, 2002. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 215-233, February.
  8. Lange, Andreas & Vogt, Carsten, 2003. "Cooperation in international environmental negotiations due to a preference for equity," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2049-2067, September.
  9. Nicholas E. Burger & Charles D. Kolstad, 2009. "Voluntary Public Goods Provision, Coalition Formation, and Uncertainty," NBER Working Papers 15543, National Bureau of Economic Research, Inc.
  10. Michael Finus & Stefan Maus, 2008. "Modesty May Pay!," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(5), pages 801-826, October.
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Citations

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Cited by:
  1. Karp, Larry & Simon, Leo, 2012. "Participation Games and international environmental agreements: a nonparametric model," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5693n1nf, Department of Agricultural & Resource Economics, UC Berkeley.
  2. Kesternich, Martin & Lange, Andreas & Sturm, Bodo, 2012. "The impact of burden sharing rules on the voluntary provision of public goods," ZEW Discussion Papers 12-033, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Gerber, Anke & Neitzel, Jakob & Wichardt, Philipp C., 2013. "Minimum participation rules for the provision of public goods," European Economic Review, Elsevier, vol. 64(C), pages 209-222.
  4. Leo Wangler & Juan-Carlos Altamirano-Cabrera & Hans-Peter Weikard, 2013. "The political economy of international environmental agreements: a survey," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 13(3), pages 387-403, September.
  5. Charles D. Kolstad, 2011. "Public Goods Agreements with Other-Regarding Preferences," NBER Working Papers 17017, National Bureau of Economic Research, Inc.
  6. David M. McEvoy & Todd L. Cherry & John K. Stranlund, 2011. "The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence," Working Papers 2011-2, University of Massachusetts Amherst, Department of Resource Economics.

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