Pareto meets Olson – A Note on Pareto-optimality and Group Size in Linear Public Goods Games
In this paper I examine the relationship between Pareto-optimality and group size in linear public goods games or experiments. In particular, I use the standard setting of homogeneous linear public goods experiments and apply a recently developed tool to identify all Pareto-optimal allocations in such settings. It turns out that under any conceivable circumstances, ceteris paribus, small groups have a higher Pareto-ratio (Pareto-optimal allocations over total allocations) than large groups. Hence, if Pareto-optimality of an allocation is a property that makes such allocations acceptable and maintainable, small groups will find is easier to provide Pareto-optimal amounts of a public good than large groups. This is a novel reasoning for Mancur Olson’s claim, in particular, with respect to what he has termed inclusive goods and inclusive groups.
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- Michael Pickhardt, 2005. "Teaching Public Goods Theory With a Classroom Game," The Journal of Economic Education, Taylor & Francis Journals, vol. 36(2), pages 145-159, April.
- Hokamp, Sascha & Pickhardt, Michael, 2011.
"Pareto-optimality in linear public goods games,"
CAWM Discussion Papers
45, Center of Applied Economic Research Münster (CAWM), University of Münster.
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- Brandts, Jordi & Schram, Arthur, 2001. "Cooperation and noise in public goods experiments: applying the contribution function approach," Journal of Public Economics, Elsevier, vol. 79(2), pages 399-427, February.
- Ananish Chaudhuri, 2011. "Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature," Experimental Economics, Springer, vol. 14(1), pages 47-83, March.
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