The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence

26 Pages Posted: 5 Apr 2011

See all articles by David M. McEvoy

David M. McEvoy

Appalachian State University - Department of Economics

Todd L. Cherry

Appalachian State University - Department of Economics

John Stranlund

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

Date Written: April 4, 2011

Abstract

This paper examines the endogenous formation of coalitions that provide public goods in which players implement a minimum participation requirement before deciding whether to join. We demonstrate theoretically that payoff-maximizing players will vote to implement efficient participation requirements and these coalitions will form. However, we also demonstrate that if some players are averse to inequality they can cause inefficient outcomes. Inequality-averse players can limit free riding by implementing larger than efficient coalitions or by blocking efficient coalitions from forming. We test the theory with experimental methods and observe individual behavior and coalition formation consistent with a model of inequality-averse players.

Keywords: public goods, coalition formation, inequality aversion, participation requirement, experiments

JEL Classification: C92, H41

Suggested Citation

McEvoy, David M. and Cherry, Todd L. and Stranlund, John, The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence (April 4, 2011). Available at SSRN: https://ssrn.com/abstract=1802703 or http://dx.doi.org/10.2139/ssrn.1802703

David M. McEvoy (Contact Author)

Appalachian State University - Department of Economics ( email )

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Todd L. Cherry

Appalachian State University - Department of Economics ( email )

Raley Hall
Boone, NC 28608
United States

John Stranlund

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

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

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