The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence

Department of Resource Economics Working Paper No. 2008-2

65 Pages Posted: 26 Jul 2008

See all articles by David M. McEvoy

David M. McEvoy

Appalachian State University - Department of Economics

James J. Murphy

University of Alaska Anchorage

John M. Spraggon

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics

John Stranlund

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics

Date Written: May 2008

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.

Keywords: stable coalitions, self-enforcing agreements, compliance, enforcement, public goods

JEL Classification: H41, C92

Suggested Citation

McEvoy, David M. and Murphy, James J. and Spraggon, John M. and Stranlund, John, The Problem of Maintaining Compliance within Stable Coalitions: Experimental Evidence (May 2008). Department of Resource Economics Working Paper No. 2008-2, Available at SSRN: https://ssrn.com/abstract=1177942 or http://dx.doi.org/10.2139/ssrn.1177942

David M. McEvoy (Contact Author)

Appalachian State University - Department of Economics ( email )

416 Howard Street
Boone, NC 28608
United States
828-262-2148 (Phone)
828-262-6105 (Fax)

James J. Murphy

University of Alaska Anchorage ( email )

Anchorage, AK
United States
907-786-1936 (Phone)

HOME PAGE: http://faculty.cbpp.uaa.alaska.edu/jmurphy/

John M. Spraggon

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics ( email )

Stockbridge Hall
80 Campus Center Way
Amherst, MA 01003-9246
United States

John Stranlund

University of Massachusetts at Amherst - College of Natural Resources & the Environment - Department of Resource Economics ( email )

Stockbridge Hall
80 Campus Center Way
Amherst, MA 01003-9246
United States
413-545-6328 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
62
Abstract Views
843
Rank
717,222
PlumX Metrics