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Voting for Burden Sharing Rules in Public Goods Games

Carlo Gallier (), Martin Kesternich () and Bodo Sturm ()
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Carlo Gallier: Centre for European Economic Research (ZEW)
Bodo Sturm: Centre for European Economic Research (ZEW)

Environmental & Resource Economics, 2017, vol. 67, issue 3, 535-557

Abstract: Abstract We experimentally investigate whether groups of heterogeneous agents can reach an agreement on how to share the costs of providing a public good. Thereby, we explore the performance of different burden sharing rules being implemented either endogenously or exogenously. In case of an endogenously implemented burden sharing rule, subjects vote for different burden sharing schemes either by unanimity or majority vote. Despite the fact that preferences for the allocation schemes differ among agents, most groups agree upon a common scheme, and consequently avoid an uncoordinated action. Our results reveal both the opportunities and risks of burden sharing negotiations. We find average efficiency levels to increase in case an agreement is reached. If groups however fail to agree upon a common rule, cooperation collapses and efficiency levels decrease compared to a voluntary contribution mechanism being exogenously imposed. Most importantly, agents who face a voting decision on average receive higher payoffs than agents in an exogenously implemented voluntary contribution mechanism and do not earn less than participants in any externally determined burden sharing rule.

Keywords: Public goods; Experiment; Cooperation; Burden sharing; Minimum contribution rules; Voting; Endogenous institutions; Agreement formation (search for similar items in EconPapers)
JEL-codes: C72 C91 C92 D02 D72 H41 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Voting for burden sharing rules in public goods games (2014) Downloads
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