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Providing Public Goods Without Strong Sanctioning Institutions

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Author Info
Anke Gerber (agerber@isb.unizh.ch)
Philipp C. Wichardt (University of Bonn, Department of Economics, Econ. Theory III, Adenauerallee 24-42, 53113 Bonn, Germany. philipp.wichardt@uni-bonn.de.)
Abstract

This paper proposes a simple mechanism aimed to establish positive contributions to public goods in the absence of powerful institutions to sanction free-riders. The idea of the mechanism is to require players to commit to the public good by paying a deposit prior to the contribution stage. If all players commit in this way, those players who do not contribute their share to the public good forfeit their deposit. If there is no universal commitment, all deposits are refunded and the standard game is played. Given deposits are sufficiently high, prior commitment and full ex post contributions are part of a strict subgame perfect Nash equilibrium for the resulting game. As the mechanism obviates the need for any ex post prosecution of free-riders, it is particularly suited for situations where players do not submit to a common authority as in the case of international agreements.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 194.

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Date of creation: Feb 2007
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Handle: RePEc:trf:wpaper:194

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Related research
Keywords: public goods; cooperation; institutions; Climate-Change Treaties;

Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

This paper has been announced in the following NEP Reports:

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  1. Ernst Fehr & Simon Gachter, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September. [Downloadable!] (restricted)
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  2. Josef Falkinger et al., 2000. "A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence," American Economic Review, American Economic Association, vol. 90(1), pages 247-264, March. [Downloadable!] (restricted)
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  3. Kosfeld, Michael & Okada, Akira & Riedl, Arno, 2006. "Institution Formation in Public Goods Games," Research Memoranda 029, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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