We Are Not Alone: The Impact of Externalities on Public Good Provision

Christoph Engel and Bettina Rockenbach ()
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Bettina Rockenbach: University of Erfurt and Center for empirical research in economics and behavioral science (CEREB)

No 2009_29, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: Public good provision is often local and also affects bystanders. Is provision harder if contributions harm bystanders, and is provision easier if outsiders gain a windfall profit? In an experiment we observe that both positive and negative externalities reduce provision levels whenever actors risk falling back behind bystanders. The mere presence of unaffected bystanders already dampens contributions. This behavior seems to result from the interplay of two motives: the desire to realize opportunities for joint gains, and concerns for comparative performance. Individual payoff comparisons to the other actors as well as to individual bystanders drive contributions down.

Keywords: Public Good; Externality; Conditional Cooperation; Inequity Aversion (search for similar items in EconPapers)
JEL-codes: C91 C92 D03 D43 D62 H23 H41 L13 (search for similar items in EconPapers)
Date: 2009-08, Revised 2011-05
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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