Experimental Economics

, Volume 18, Issue 1, pp 154–171 | Cite as

Gunning for efficiency with third party enforcement in threshold public goods

Original Paper

Abstract

When public goods can only be provided when donations cross a minimum threshold, this creates an advantage in that Pareto Efficient outcomes can be Nash Equilibria. Despite this, experiments have shown that groups struggle to coordinate on one of the many efficient equilibria. We apply a mechanism used successfully in continuous public goods games, the Hired Gun Mechanism (Andreoni and Gee in J. Public Econ. 96(11–12):1036–1046, 2012), to see if it can successfully get subjects across the threshold. When we use the mechanism to eliminate only inefficient equilibria, without addressing coordination, there is a modest but statistically insignificant improvement with the mechanism. However, when we hone the mechanism to eliminate all but one of the provision-point equilibria, thereby addressing the coordination issue, the mechanism moves all subjects to the desired efficient outcome almost immediately. In fact, after only one round using the hired gun mechanism, all subject are coordinating on the chosen equilibrium. The mechanism can be applied in settings where a group (1) has a plan for public good provision, (2) can measure contributions, (3) can fine members and (4) has an agreed upon standard for expected contributions. In these settings simple punishments, when focused on solving coordination as well as free riding, can greatly improve efficiency.

Keywords

Public goods Experiment Laboratory Equilibrium selection Punishment Free riding 

JEL Classification

C72 C91 C92 D7 H41 H42 

Supplementary material

10683_2014_9392_MOESM1_ESM.pdf (338 kb)
(PDF 338 kB)

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Copyright information

© Economic Science Association 2014

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of California, San DiegoLa JollaUSA
  2. 2.NBERCambridgeUSA
  3. 3.Department of EconomicsTufts UniversityMedfordUSA

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