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The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence

David McEvoy (), James Murphy (), John Spraggon () and John Stranlund ()

No 08-10, Working Papers from Department of Economics, Appalachian State University

Abstract: This study examines the performance of stable cooperative coalitions that form to provide a public good when coalition members have the opportunity to not comply with their commitments. A stable coalition is one in which no member wishes to leave and no non-member wishes to join. To counteract the incentive to violate their commitments, coalition members fund a third-party enforcer. This leads to the theoretical conclusion that stable coalitions are larger (and provide more of a public good) when their members must finance enforcement relative to when compliance is ensured without the need for costly enforcement. However, our experiments reveal that giving coalition members the opportunity to violate their commitments while requiring them to finance enforcement to maintain compliance reduces the overall provision of the public good. The decrease in the provision of the public good is attributed to an increase in the participation threshold for a theoretically stable coalition to form and to significant levels of noncompliance. When we abandon the strict stability conditions and require all subjects to join a coalition for it to form, the average provision of the public good increases significantly. Key Words: stable coalitions, self-enforcing agreements, compliance, enforcement, public goods

JEL-codes: H41 C92 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cdm, nep-exp and nep-pol
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Citations: View citations in EconPapers (13) Track citations by RSS feed

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http://econ.appstate.edu/RePEc/pdf/wp0810.pdf (application/pdf)

Related works:
Journal Article: The problem of maintaining compliance within stable coalitions: experimental evidence (2011) Downloads
Working Paper: The problem of maintaining compliance within stable coalitions: experimental evidence (2010) Downloads
Working Paper: The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence (2008) Downloads
Working Paper: The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence (2008) Downloads
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