A mechanism of proportional contributions for public good games

Rafat Beigpoor Shahrivar, Ilka Duesterhoeft, Marco Rogna and Carla Vogt

No 990, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Public good games in coalitional form, such as the ones depicting international environmental agreements for the reduction of a global pollutant, generally foresee scarce levels of cooperation. The incentive to free ride, that increases for higher levels of cooperation, prevents the formation of stable coalitions. The introduction of other-regarding preferences, in the form of Fehr and Schmidt utility functions, enlarges cooperation, but still at suboptimal levels. The present paper considers a further possibility, namely the introduction of a mechanism through which the contributions of players to the public good are proportional to the average contribution of the other players abiding to the mechanism: proportional contributions. The mechanism is therefore rooted into reciprocity. By applying it to a standard abatement game parameterized on the RICE model, we show that the mechanism is in fact able to increase cooperation both under standard and under F&S preferences. Stability of the grand coalition is never reached, but potential internally stable grand coalitions are achieved under F&S preferences. The attainment of higher cooperation comes at the expense of the level of global abatement that is lower when proportional contributions are in place.

Keywords: Coalitional game; cooperation; F&S preferences; public good; reciprocity (search for similar items in EconPapers)
JEL-codes: C72 D63 H41 Q54 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cdm, nep-exp, nep-gth and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:990

DOI: 10.4419/96973156

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