Voting for Burden Sharing Rules in Public Goods Games

59 Pages Posted: 2 Sep 2014

See all articles by Carlo Gallier

Carlo Gallier

ZEW – Leibniz Centre for European Economic Research

Martin Kesternich

ZEW – Leibniz Centre for European Economic Research

Bodo Sturm

Leipzig University of Applied Sciences - HTWK Leipzig

Date Written: August 27, 2014

Abstract

In this experiment, we endogenize the choice of which contribution scheme is implemented in a public goods game. We investigate three rule-based contribution schemes. In a first step, players agree on a common group provision level using the principle of the smallest common denominator. Subsequently, this group investment is allocated according to a specific rule to individual minimum contributions. The game is implemented either as a Single- or a Multi-Phase Game. In the Single-Phase Game, the contribution schemes are exogenously implemented. In the Multi-Phase Game, we let subjects vote on the rule-based contribution schemes. If a scheme obtains a sufficient majority it is implemented. In case no sufficient majority is reached, subjects have to make their contributions to the public good using the voluntary contribution mechanism (VCM). Our results suggest that the endogenous choice of a contribution scheme has an impact on the level of contributions. In case of a rule-based contribution scheme which equalizes payoffs, contributions are higher if subjects choose the scheme than in case the scheme is implemented exogenously. In contrast, contributions are higher if the VCM is implemented exogenously than in case a sufficient majority cannot be obtained and, therefore, subjects have to play the VCM.

Keywords: public goods, endogenous institutions, minimum contribution rules, cooperation

JEL Classification: C72, C92, H41

Suggested Citation

Gallier, Carlo and Kesternich, Martin and Sturm, Bodo, Voting for Burden Sharing Rules in Public Goods Games (August 27, 2014). ZEW - Centre for European Economic Research Discussion Paper No. 14-056, Available at SSRN: https://ssrn.com/abstract=2489910 or http://dx.doi.org/10.2139/ssrn.2489910

Carlo Gallier (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Martin Kesternich

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Bodo Sturm

Leipzig University of Applied Sciences - HTWK Leipzig ( email )

Leipzig
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
45
Abstract Views
673
PlumX Metrics