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Voting for Burden Sharing Rules in Public Goods Games

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Abstract

We experimentally investigate whether groups of heterogeneous agents can reach an agreement on how to share the costs of providing a public good. Thereby, we explore the performance of different burden sharing rules being implemented either endogenously or exogenously. In case of an endogenously implemented burden sharing rule, subjects vote for different burden sharing schemes either by unanimity or majority vote. Despite the fact that preferences for the allocation schemes differ among agents, most groups agree upon a common scheme, and consequently avoid an uncoordinated action. Our results reveal both the opportunities and risks of burden sharing negotiations. We find average efficiency levels to increase in case an agreement is reached. If groups however fail to agree upon a common rule, cooperation collapses and efficiency levels decrease compared to a voluntary contribution mechanism being exogenously imposed. Most importantly, agents who face a voting decision on average receive higher payoffs than agents in an exogenously implemented voluntary contribution mechanism and do not earn less than participants in any externally determined burden sharing rule.

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Notes

  1. In our experiment, integer multiples of three are required for \(Q_{i}^{min}\).

  2. Mathematically, the weakly dominant strategy of type40 players is to choose \(Q_i^{min}=80\), but the minimum group provision level has to be an integer multiple of three. Therefore, the weakly dominant strategy is to choose the greatest integer multiple of three below 80.

  3. See Supplementary Material Section 1 for a graphical illustration and the analytical solution.

  4. The payoff function of type40 players is not monotonically increasing in \(Q^{min}\). Therefore, depending on their beliefs about the other players’ proposals, the best response of type40 players is to propose \(Q_{type40}^{min}=0\) or \(Q_{type40}^{min}=E\). We assume type40 players to anticipate the weakly dominant strategies of their group members and since their payoff is maximized by \(Q_{type40}^{min}=E\) then, we expect type40 players to propose full contributions.

  5. In a situation where type20 and type30 players suggest eqpay under unanimity voting, the VCM might emerge as an equilibrium if type40 players do not expect the two other types to follow their weakly dominant strategies. Consequently, the best response of type40 players is to propose \(Q_{type40}^{min}=0\), which corresponds to the VCM.

  6. See Supplementary Material Section 2 for a detailed description and a graphical illustration.

  7. We provide the instructions and screenshots in Sections 4 and 5 of the Supplementary Material.

  8. See Supplementary Material in Section 2 for a graphical illustration. We are aware that inequality might also be indirectly reduced by voluntarily exceeding the required individual minimum level. For instance, type40 players might have an incentive to contribute more than required in order to reduce inequality. Anticipating this, type20 and type30 players might have an incentive to reduce the binding minimum contribution order to free ride on the voluntary contributions of the type40 player. However, we focus on the case where players try to directly reduce inequality by implementing a binding minimum contribution level.

  9. See Supplementary Material Section 3 for a detailed graphical illustration of the voting behavior in the respective rounds of the collective-choice phase of the Multi-Phase Game, either under majority or under unanimity rule voting.

  10. A series of random-effects regression models is used in order to determine the payoffs of individuals. The discussion of the results is based on standard errors computed at group level. We consider individual level random effects, i.e., one observation of one individual corresponds to the panel variable and the period defines the time variable. All in all, our econometric analysis comprises 3630 observations. Due to missing sociodemographic information, we had to remove three out of the 366 participants from our economic analysis. Regarding the remaining 363 subjects, we have one observation for each of the 10 payoff-relevant periods.

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Authors and Affiliations

  1. Centre for European Economic Research (ZEW), L7, 1, 68161, Mannheim, Germany

    Carlo Gallier, Martin Kesternich & Bodo Sturm

  2. Leipzig University of Applied Sciences, 04277, Leipzig, Germany

    Bodo Sturm

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  1. Carlo Gallier
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  2. Martin Kesternich
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  3. Bodo Sturm
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Correspondence to Martin Kesternich.

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Gallier, C., Kesternich, M. & Sturm, B. Voting for Burden Sharing Rules in Public Goods Games. Environ Resource Econ 67, 535–557 (2017). https://doi.org/10.1007/s10640-016-0022-6

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