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Not efficient but payoff dominant: Experimental investigations of equilibrium play in binary threshold public good games

Friedel Bolle and Jörg Spiller ()

No 379, Discussion Papers from European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics

Abstract: In Binary Threshold Public Good (BTPG) games players contribute or not to the production of a public good which is produced if and only if there are "enough" contributors. There is a plethora of equilibria in BTPG games. We experimentally test general theoretical attributes of equilibria and proposals for equilibrium selection. As theory predicts, if the cost/benefit ratio is the same, then subjects play (almost) the same mixture of strategies and, after switching from a positive to a negative frame, the theoretically expected "mirrored" behavior can be observed, i.e. contrary to most linear Public Good experiments we do not find a framing effect. A finite mixture model successfully (i.e. without rejection in a chi-square test) describes behavior in all eight experimental games (same parameters for four thresholds and positive/negative frame). The Harsanyi-Selten theory of equilibrium selection is moderately supported. Efficiency as an equilibrium selection device and also risk dominance are clearly rejected.

Keywords: Binary Threshold Public Goods; framing; equilibrium selection; payoff dominance; risk dominance; efficiency; experiment (search for similar items in EconPapers)
JEL-codes: C72 D72 H41 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-hpe
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