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Asset Markets And Equilibrium Selection In Public Goods Games With Provision Points: An Experimental Study

Author

Listed:
  • Enrique Fatas

    () (Universitat de València)

  • Tibor Neugebauer

    () (University Hannover)

  • Bruno Broseta

    (Organismo Público Valenciano de Investigación (OPVI))

Abstract

In this paper we report some experimental results on the effects that auctioning the right to play a public goods game with a provision point may have on equilibrium selection and efficiency. A control treatment reveals that, as in the experimental literature for similar environments, subjects' behavior converges to the inefficient outcome whenever they are endowed with the right to play the game. However, auctioning off such a right among a larger population of players has a significant efficiency-enhancing effect. Once the Pareto-dominant equilibrium in the second stage is reached, the auction price at the first stage increases to its upper limit, dissipating all players' gains associated with the provision of the public good. The full contribution equilibrium was extremely robust: individual subjects' deviations from the equilibrium strategy were not able to force lower market prices and did not affect provision of the public good in subsequent periods.

Suggested Citation

  • Enrique Fatas & Tibor Neugebauer & Bruno Broseta, 2001. "Asset Markets And Equilibrium Selection In Public Goods Games With Provision Points: An Experimental Study," Working Papers. Serie AD 2001-29, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:2001-29
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2001-29.pdf
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    References listed on IDEAS

    as
    1. Van Huyck John B. & Battalio Raymond C. & Beil Richard O., 1993. "Asset Markets as an Equilibrium Selection Mechanism: Coordination Failure, Game Form Auctions, and Tacit Communication," Games and Economic Behavior, Elsevier, vol. 5(3), pages 485-504, July.
    2. R. Isaac & James Walker & Susan Thomas, 1984. "Divergent evidence on free riding: An experimental examination of possible explanations," Public Choice, Springer, vol. 43(2), pages 113-149, January.
    3. Bagnoli, Mark & McKee, Michael, 1991. "Voluntary Contribution Games: Efficient Private Provision of Public Goods," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 351-366, April.
    4. Abbink, Klaus & Abdolkarim Sadrieh, 1995. "RatImage - research Assistance Toolbox for Computer-Aided Human Behavior Experiments," Discussion Paper Serie B 325, University of Bonn, Germany.
    5. Mark Isaac, R. & McCue, Kenneth F. & Plott, Charles R., 1985. "Public goods provision in an experimental environment," Journal of Public Economics, Elsevier, vol. 26(1), pages 51-74, February.
    6. Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 585-608, October.
    7. R. Isaac & David Schmidtz & James Walker, 1989. "The assurance problem in a laboratory market," Public Choice, Springer, vol. 62(3), pages 217-236, September.
    8. Gérard P. Cachon & Colin F. Camerer, 1996. "Loss-Avoidance and Forward Induction in Experimental Coordination Games," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 165-194.
    9. John B. Van Huyck & Raymond C. Battalio & Richard O. Beil, 1991. "Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 885-910.
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    Citations

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    Cited by:

    1. Jason Shachat & J. Todd Swarthout, 2013. "Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection," Games, MDPI, Open Access Journal, vol. 4(4), pages 1-16, November.
    2. A. Arrighetti & S. Curatolo, 2010. "Opportunismo e coordinamento: soluzioni regolative e istituzionali," Economics Department Working Papers 2010-EP02, Department of Economics, Parma University (Italy).
    3. Jordi Brandts & Antonio Cabrales & Gary Charness, 2007. "Forward induction and entry deterrence: an experiment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 183-209, October.
    4. Enrique Fatas & Juan Mañez, 2007. "Are low-price promises collusion guarantees? An experimental test of price matching policies," Spanish Economic Review, Springer;Spanish Economic Association, vol. 9(1), pages 59-77, March.
    5. repec:spr:sochwe:v:48:y:2017:i:4:d:10.1007_s00355-017-1036-x is not listed on IDEAS
    6. Rachel Croson & Enrique Fatas & Tibor Neugebauer, 2006. "An Experimental Analysis Of Conditional Cooperation," Working Papers. Serie AD 2006-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    7. Chlaß, Nadine & Perea, Andrés, 2016. "How do people reason in dynamic games?," Annual Conference 2016 (Augsburg): Demographic Change 145881, Verein für Socialpolitik / German Economic Association.
    8. repec:wyi:journl:002215 is not listed on IDEAS
    9. Choo, Lawrence, 2016. "Market competition for decision rights: An experiment based on the “Hat Puzzle Problem”," MPRA Paper 73408, University Library of Munich, Germany.

    More about this item

    Keywords

    Public Goods; Provision Points; Experimental Markets.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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