Real-time Monitoring in a Public Goods Game

Abstract

Public goods games are prevalent in economics and are known to be challenging to resolve. In this study, we introduce a novel incremental commitment mechanism in a linear public goods game, where contribution increases during a fixed time interval, and people can choose when to stop their contribution from increasing, while their actions are perfectly monitored. We shows both theoretically and experimentally that it is a very powerful mechanism to help achieve almost full contribution. Moreover, we compare this mechanism with other mechanisms under similar real-time monitoring environment, and find that when the incremental commitment feature is removed, the mechanism becomes ineffective. We contribute to the current theoretical and empirical literature on improving cooperation in public goods games by introducing a novel mechanism, which can be potentially extended to other social dilemma situations.

Keywords: public goods game, continuous time, commitment, cheap talk

JEL Classification: C72, C92, D82