Public Goods Provision in a Network Formation Game

51 Pages Posted: 9 Aug 2022

See all articles by Simin He

Simin He

Shanghai University of Finance and Economics - School of Economics

Xinlu Zou

Shanghai University of Finance and Economics

Date Written: August 5, 2022

Abstract

This study investigates how people provide public goods in a network formation game. In this game, players first form a network through bilateral linking, with or without a link cost, and then contribute to a public good, which can benefit both themselves and their direct neighbors. Theoretically, there are two equilibrium goods provision strategies: splitting and alternation. Conditioned on a goods provision strategy, efficient networks are always symmetric and less dense when the link cost increases. In the laboratory experiment, we find that subjects predominantly converge to splitting instead of alternation, and they are often able to form efficient networks. Subjects form fewer links under a higher link cost, and there is a tendency to form too many links.

Keywords: Network formation, Public goods, Repeated games, Coordination complexity, Laboratory experiment

JEL Classification: D85, C72, C92

Suggested Citation

He, Simin and Zou, Xinlu, Public Goods Provision in a Network Formation Game (August 5, 2022). Available at SSRN: https://ssrn.com/abstract=4182214 or http://dx.doi.org/10.2139/ssrn.4182214

Simin He (Contact Author)

Shanghai University of Finance and Economics - School of Economics ( email )

777 Guoding Road
Shanghai, 200433
China

Xinlu Zou

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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