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On the formation of coalitions to provide public goods: Experimental evidence from the lab

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  • Dannenberg, Astrid
  • Lange, Andreas
  • Sturm, Bodo

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 freeriding 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 ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 10-037.

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Date of creation: 2010
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Handle: RePEc:zbw:zewdip:10037

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Keywords: public goods; institutions; coalition formation; cooperation;

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  1. 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.
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Cited by:
  1. 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.
  2. 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.
  3. Karp, Larry & Simon, Leo, 2013. "Participation games and international environmental agreements: A non-parametric model," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 326-344.
  4. Charles D. Kolstad, 2011. "Public Goods Agreements with Other-Regarding Preferences," NBER Working Papers 17017, National Bureau of Economic Research, Inc.
  5. 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.
  6. Leo Wangler & JJuan-Carlos Altamirano-Cabrera & Hans-Peter Weikard, 2011. "The Political Economy of International Environmental Agreements: A Survey," Jena Economic Research Papers 2011-038, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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