Minimum Participation Rules for the Provision of Public Goods

34 Pages Posted: 20 Feb 2012

See all articles by Anke Gerber

Anke Gerber

Universit├Ąt Hamburg

Jakob Neitzel

University of Hamburg - Department of Economics

Philipp C. Wichardt

University of Rostock - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 20, 2012

Abstract

This paper considers the endogenous formation of an institution to provide a public good. If the institution governs only its members, players have an incentive to free ride on the institution formation of others and the social dilemma is simply shifted to a higher level. Addressing this second-order social dilemma, we study the effectiveness of three different minimum participation requirements: full participation / unanimity rule; partial participation; unanimity first and in case of failure partial participation. While unanimity is most effective once established, one might suspect that a weaker minimum participation rule is preferable in practice as it might facilitate the formation of the institution. The data of our laboratory experiment do not support this latter view, though. In fact, weakening the participation requirement does not increase the number of implemented institutions. Thus, we conclude that the most effective participation requirement is the unanimity rule which leaves no room for free riding on either level of the social dilemma.

Keywords: public goods, coalition formation, endogenous institutions

JEL Classification: C720, C920, H410, D020

Suggested Citation

Gerber, Anke and Neitzel, Jakob and Wichardt, Philipp C., Minimum Participation Rules for the Provision of Public Goods (February 20, 2012). CESifo Working Paper Series No. 3733. Available at SSRN: https://ssrn.com/abstract=2008164

Anke Gerber

Universit├Ąt Hamburg ( email )

Faculty of Business, Economics and Social Sciences
Von-Melle-Park 5
Hamburg, 20146
Germany

Jakob Neitzel

University of Hamburg - Department of Economics ( email )

Von-Melle-Park 5
D-20146 Hamburg
Germany

Philipp C. Wichardt (Contact Author)

University of Rostock - Department of Economics ( email )

Ulmenstr. 69
Rostock, 18057
Germany

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