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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.

Suggested Citation

  • 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.
  • Handle: RePEc:zbw:zewdip:10037
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    References listed on IDEAS

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    Cited by:

    1. Kesternich, Martin & Lange, Andreas & Sturm, Bodo, 2014. "The impact of burden sharing rules on the voluntary provision of public goods," Journal of Economic Behavior & Organization, Elsevier, vol. 105(C), pages 107-123.
    2. 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.
    3. Andreas Löschel & Dirk Rübbelke, 2014. "On the Voluntary Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 195-204, April.
    4. 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.
    5. Leo Wangler & Juan-Carlos Altamirano-Cabrera & Hans-Peter Weikard, 2013. "The political economy of international environmental agreements: a survey," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 13(3), pages 387-403, September.
    6. 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.
    7. Hong, Fuhai & Lim, Wooyoung, 2016. "Voluntary participation in public goods provision with Coasian bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 102-119.
    8. repec:gam:jgames:v:8:y:2017:i:4:p:52-:d:121380 is not listed on IDEAS
    9. Luigi Butera & John A. List, 2017. "An Economic Approach to Alleviate the Crises of Confidence in Science: With an Application to the Public Goods Game," NBER Working Papers 23335, National Bureau of Economic Research, Inc.
    10. Charles D. Kolstad, 2011. "Public Goods Agreements with Other-Regarding Preferences," NBER Working Papers 17017, National Bureau of Economic Research, Inc.
    11. Kube, Sebastian & Schaube, Sebastian & Schildberg-Hörisch, Hannah & Khachatryan, Elina, 2015. "Institution formation and cooperation with heterogeneous agents," European Economic Review, Elsevier, vol. 78(C), pages 248-268.
    12. David McEvoy & Todd Cherry & John Stranlund, 2015. "Endogenous Minimum Participation in International Environmental Agreements: An Experimental Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 729-744, December.
    13. Ramalingam, Abhijit & Godoy, Sara & Morales, Antonio J. & Walker, James M., 2016. "An individualistic approach to institution formation in public good games," Journal of Economic Behavior & Organization, Elsevier, vol. 129(C), pages 18-36.

    More about this item

    Keywords

    public goods; institutions; coalition formation; cooperation;

    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
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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