Do binding agreements solve the social dilemma?

Sylvie Thoron, Emmanuel Sol and Marc Willinger
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Emmanuel Sol: LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UPVM - Université Paul-Valéry - Montpellier 3 - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier, CNRS - Centre National de la Recherche Scientifique

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Abstract: We investigate experimentally whether "binding agreements" can provide a solution to the social dilemma that arises in the presence of pure public goods. Signing a binding agreement can prevent players from free riding on the contributions to the public good. However, a well known theoretical result is that the outcome of the endogenous formation of agreements is not necessarily efficient. Our setting is a bargaining game in which agreements form sequentially. The individual level of contribution to the public good increases with the size of the coalition reaching an agreement and the global agreement is always the socially optimal structure. There are two equilibrium outcomes, the global agreement and an asymmetric structure, which consists of two coalitions of different sizes, the small one free riding on the contributions of the larger one. We run an experiment which lends force to the theoretical result that outcomes may be inefficient. However, subjects do not play Nash and the experimental outcome is, on average, even more inefficient than the theory predicts. Our analysis leads to the conclusion that different types of behaviour co-exist.

Keywords: AGREEMENT; PUBLIC GOOD; NEGOTIATION; EXPERIMENT; SEQUENTIAL GAME; EXTERNALITIES (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

Published in Journal of Public Economics, 2009, 93 (11-12), pp.1271-1282. ⟨10.1016/j.jpubeco.2009.09.002⟩

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Related works:
Journal Article: Do binding agreements solve the social dilemma? (2009)
Working Paper: Do binding agreements solve the social dilemma? (2007)
Working Paper: Do binding agreements solve the social dilemma ? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02665220

DOI: 10.1016/j.jpubeco.2009.09.002

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