Give Everybody a Voice! The Power of Voting in a Public Goods Experiment with Externalities

22 Pages Posted: 6 Nov 2014

See all articles by Christoph Engel

Christoph Engel

Max Planck Institute for Research on Collective Goods; University of Bonn - Faculty of Law & Economics; Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students; Universität Osnabrück - Faculty of Law

Bettina Rockenbach

University of Cologne

Date Written: November 2014

Abstract

We study the effect of voting when insiders’ public goods provision may affect passive outsiders. Without voting insiders’ contributions do not differ, regardless of whether outsiders are positively or negatively affected or even unaffected. Voting on the recommended contribution level enhances contributions if outsiders are unaffected and internalizes the negative externality by lowering contributions when outsiders are negatively affected. Remarkably, voting does not increase contributions when it would be most desirable, i.e. with a positive externality. Here, participants vote for high contributions, yet compliance is poor. Unfavorable payoff comparisons to the outsiders that gain a windfall profit drive contributions down.

Keywords: experiment, Public Good, externality, voting

JEL Classification: H41, D43, L13, C92, C91, D62, D03, H23

Suggested Citation

Engel, Christoph and Rockenbach, Bettina, Give Everybody a Voice! The Power of Voting in a Public Goods Experiment with Externalities (November 2014). MPI Collective Goods Preprint, No. 2014/16, Available at SSRN: https://ssrn.com/abstract=2519479 or http://dx.doi.org/10.2139/ssrn.2519479

Christoph Engel (Contact Author)

Max Planck Institute for Research on Collective Goods ( email )

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University of Bonn - Faculty of Law & Economics

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Germany

Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students ( email )

Burgemeester Oudlaan 50
PO Box 1738
Rotterdam
Netherlands

Universität Osnabrück - Faculty of Law

Osnabruck, D-49069
Germany

Bettina Rockenbach

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany
++49 470 8664 (Phone)
++49 470 8668 (Fax)

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