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The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence

  • David M. McEvoy
  • Todd Cherry
  • John K. Stranlund

This paper examines the endogenous formation of coalitions that provide public goods in which players implement a minimum participation requirement before deciding whether to join. We demonstrate theoretically that payoff-maximizing players will vote to implement efficient participation requirements and these coalitions will form. However, we also demonstrate that if some players are averse to inequality they can cause inefficient outcomes. Inequality-averse players can limit free riding by implementing larger than efficient coalitions or by blocking efficient coalitions from forming. We test the theory with experimental methods and observe individual behavior and coalition formation consistent with a model of inequality-averse players. Key Words:

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Paper provided by Department of Economics, Appalachian State University in its series Working Papers with number 11-01.

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Date of creation: 2011
Date of revision:
Handle: RePEc:apl:wpaper:11-01
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  1. Ernst Fehr & Simon Gaechter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," CESifo Working Paper Series 336, CESifo Group Munich.
  2. Matthias Sutter & Stefan Haigner & Martin G. Kocher, 2010. "Choosing the Carrot or the Stick? Endogenous Institutional Choice in Social Dilemma Situations," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1540-1566.
  3. Dannenberg, Astrid & Lange, Andreas & Sturm, Bodo, 2010. "On the formation of coalitions to provide public goods: Experimental evidence from the lab," ZEW Discussion Papers 10-037, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Michael Kosfeld & Akira Okada & Arno Riedl, 2006. "Institution Formation in Public Goods Games," CESifo Working Paper Series 1794, CESifo Group Munich.
  5. Stephan Kroll & Todd L. Cherry & Jason F. Shogren, 2007. "Voting, Punishment, And Public Goods," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 557-570, 07.
  6. Carlo Carraro & Carmen Marchiori & Sonia Oreffice, 2003. "Endogenous Minimum Participation in International Environmental Treaties," Working Papers 2003.113, Fondazione Eni Enrico Mattei.
  7. Bagnoli, Mark & McKee, Michael, 1991. "Voluntary Contribution Games: Efficient Private Provision of Public Goods," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 351-66, April.
  8. James Cox & Daniel Friedman & Steven Gjerstad, 2004. "A Tractable Model of Reciprocity and Fairness," Experimental 0406001, EconWPA.
  9. Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series 183, CESifo Group Munich.
  10. David M. McEvoy & James J. Murphy & John M. Spraggon & John K. Stranlund, 2008. "The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence," Working Papers 2008-2, University of Massachusetts Amherst, Department of Resource Economics.
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