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Providing Public Goods Without Strong Sanctioning Institutions

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  • Gerber, Anke
  • Wichardt, Philipp C.

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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Bibliographic Info

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 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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Keywords: public goods; cooperation; institutions; Climate-Change Treaties;

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  1. Kosfeld, Michael & Okada, Akira & Riedl, Arno, 2006. "Institution Formation in Public Goods Games," Research Memorandum 029, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  2. Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series 183, CESifo Group Munich.
  3. Josef Falkinger & Ernst Fehr & Simon Gaechter, . "A Simple Mechanism for the Efficient Provision of Public Goods - Experimental Evidence," IEW - Working Papers 003, Institute for Empirical Research in Economics - University of Zurich.
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