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Journal Article•DOI•

A simple mechanism for the efficient provision of public goods - experimental evidence

Josef Falkinger1, Ernst Fehr2, Simon Gächter2, Rudolf Winter-Ebmer3•
University of Regensburg1, University of Zurich2, Johannes Kepler University of Linz3
01 Mar 2000-The American Economic Review (American Economic Association)-Vol. 90, Iss: 1, pp 247-264
TL;DR: In this paper, a series of experiments designed to investigate the factor of incentive mechanisms in the case of private provisions of public goods is presented. But the results showed that the proposed incentive mechanism is very promising.
Abstract: The author reports on a series of experiments designed to investigate the factor of incentive mechanisms in the case of private provisions of public goods. In the Control treatment, there was no mechanism so that subjects faced strong free-riding incentives. In the so-called Falkinger mechanism treatment, the author implemented the Falkinger mechanism. The studies explored the impact of the mechanism in different economic environments. Results showed that the proposed incentive mechanism is very promising. Section I of the paper introduces the mechanism to be examined. Section II discusses the experimental design. Empirical results are provided in Section III, and Section IV interprets these results followed by a summary.

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Summary

  • In the Control treatment, there was no mechanism so that subjects faced strong free-riding incentives.
  • The studies explored the impact of the mechanism in different economic environments.
  • Results showed that the proposed incentive mechanism is very promising.
  • Empirical results are provided in Section III, and Section IV interprets these results followed by a summary.

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University of Zurich
Zurich Open Repository and Archive
Winterthurerstr. 190
CH-8057 Zurich
http://www.zora.unizh.ch
Year: 2000
A simple mechanism for the efficient provision of public goods:
experimental evidence
Falkinger, Josef; Fehr, Ernst; Gächter, Simon; Winter-Ebmer, Rudolf
Falkinger, Josef; Fehr, Ernst; Gächter, Simon; Winter-Ebmer, Rudolf. A simple mechanism for the efficient
provision of public goods: experimental evidence. American Economic Review 2000, 90(1):247-264.
Postprint available at:
http://www.zora.unizh.ch
Posted at the Zurich Open Repository and Archive, University of Zurich.
http://www.zora.unizh.ch
Originally published at:
American Economic Review 2000, 90(1):247-264
Falkinger, Josef; Fehr, Ernst; Gächter, Simon; Winter-Ebmer, Rudolf. A simple mechanism for the efficient
provision of public goods: experimental evidence. American Economic Review 2000, 90(1):247-264.
Postprint available at:
http://www.zora.unizh.ch
Posted at the Zurich Open Repository and Archive, University of Zurich.
http://www.zora.unizh.ch
Originally published at:
American Economic Review 2000, 90(1):247-264
A simple mechanism for the efficient provision of public goods:
experimental evidence
Abstract
The author reports on a series of experiments designed to investigate the factor of incentive mechanisms
in the case of private provisions of public goods. In the Control treatment, there was no mechanism so
that subjects faced strong free-riding incentives. In the so-called Falkinger mechanism treatment, the
author implemented the Falkinger mechanism. The studies explored the impact of the mechanism in
different economic environments. Results showed that the proposed incentive mechanism is very
promising. Section I of the paper introduces the mechanism to be examined. Section II discusses the
experimental design. Empirical results are provided in Section III, and Section IV interprets these results
followed by a summary.
Citations
More filters
Journal Article•DOI•
Rank-order competition in the voluntary provision of impure public goods

[...]

Andrej Angelovski1, Tibor Neugebauer2, Maroš Servátka3, Maroš Servátka4•
Libera Università Internazionale degli Studi Sociali Guido Carli1, University of Luxembourg2, Macquarie University3, University of Economics in Bratislava4
01 Oct 2019-Economic Inquiry
TL;DR: Rank-Order Voluntary Contribution Mechanism (RankOrder-VCM) as mentioned in this paper was proposed to mitigate free-riding in impure public goods, where group members compete via observable contributions for a larger share of the public good; high contributors receive preferential access while low contributors receive restricted access.
Abstract: Publicly provided goods often create differential payoffs due to timely or spatial distances of group members. We design and test a provision mechanism which utilizes rank competition to mitigate free-riding in impure public goods. In our Rank-Order Voluntary Contribution Mechanism (Rank-Order-VCM) group members compete via observable contributions for a larger share of the public good; high contributors receive preferential access (a larger share), while low contributors receive restricted access (a lower share). In a laboratory experiment Rank-Order-VCM elicits median contributions equal to the full endowment throughout the finitely played games with constant groups. In the control treatment, with randomly assigned ranks, the contributions are significantly lower and decline over time. We thus provide evidence of rank competition, in situations where discriminatory access to public goods is possible, being efficiency enhancing.

5 citations

Posted Content•
Payoff Levels, Loss Avoidance, and Equilibrium Selection in the Stag Hunt: An Experimental Study

[...]

Nick Feltovich1, Atsushi Iwasaki, Sobei H. Oda2•
University of Aberdeen1, Kyoto Sangyo University2
01 Feb 2008-Social Science Research Network
TL;DR: The results of a human experiment designed to test for two types of loss avoidance: certain and possible, which find differences in behavior across the three versions of Stag Hunt; these differences are hard to detect in the first round of play, but grow over time.
Abstract: Game theorists typically assume that changing a game's payoff levels - by adding the same constant to, or subtracting it from, all payoffs - should not affect behavior. While this invariance is an implication of the theory when payoffs mirror expected utilities, it is an empirical question when the "payoffs" are actually money amounts. In particular, if individuals treat monetary gains and losses differently, then payoff-level changes may matter when they result in positive payoffs becoming negative, or vice versa. We report the results of a human-subjects experiment designed to test for two types of loss avoidance: certain-loss avoidance (avoiding a strategy leading to a sure loss, in favor of an alternative that might lead to a gain) and possible-loss avoidance (avoiding a strategy leading to a possible loss, in favor of an alternative that leads to a sure gain). Subjects in the experiment play three versions of Stag Hunt, which are identical up to the level of payoffs, under a variety of treatments. We find differences in behavior across the three versions of Stag Hunt; these differences are hard to detect in the first round of play, but grow over time. When significant, the differences we find are in the direction predicted by certain- and possible-loss avoidance. Our results carry implications for games with multiple equilibria, and for theories that attempt to select among equilibria in such games.

5 citations

Journal Article•DOI•
A Proposal for a Flexible Europe

[...]

Bruno S. Frey1, Reiner Eichenberger2•
University of Zurich1, University of Fribourg2
01 Oct 2000-The World Economy
TL;DR: In this paper, a new type of jurisdictions called FOCJ (Functional, Overlapping and Competing Jurisdictions) is proposed between the EU, the CEECs, and beyond.
Abstract: "At present, new EU-members have to fully accept the ""acquis communautaire"" even if their economic and institutional development differs drastically from the EU-average. In contrast, we propose that there should be the possibility of partial entry into the EU. East European Countries should have the option of specifically entering with respect to functions where they expect positive net benefits. In order to enable such partial entry, a new type of jurisdictions called FOCJ (Functional, Overlapping and Competing Jurisdictions) is proposed between the EU, the CEECs, and beyond. Such FOCJ allow for partial integration based on economic efficiency and democratic rules."

5 citations

Journal Article•DOI•
Voluntary contributions with redistribution: The effect of costly sanctions when one person's punishment is another's reward☆

[...]

Talbot Page1, Louis Putterman1, Bruno Garcia2•
Brown University1, College of William & Mary2
01 Nov 2013-Journal of Economic Behavior and Organization
TL;DR: This article introduced new treatments of a voluntary contribution mechanism with opportunities to punish in order to see how contributions, punishments and earnings change when punishment is in the form of fines the punisher distributes to other members of her group.
Abstract: We introduce new treatments of a voluntary contribution mechanism with opportunities to punish in order to see how contributions, punishments and earnings change when punishment is in the form of fines the punisher distributes to other members of her group. The linked punishment-reward set up is of theoretical interest and could represent simultaneous shifts of social disapproval and approval. Conjectures that punishment will be better targeted, and that it will be more substantial for given deviation from others’ contributions, receive support. Making punishment redistributive increases contributions and efficiency, even after netting out the design's free resource element.

5 citations

Journal Article•DOI•
Financial infrastructure and corporate governance

[...]

Helen Allen1, Grigoria Christodoulou1, Stephen Millard1•
Bank of England1
01 Dec 2006-Social Science Research Network
TL;DR: In this article, the authors consider the case of a generic infrastructure provider operating under different forms of ownership and show that, in the presence of consumption externalities, the level of risk mitigation chosen by the infrastructure provider is less than socially optimal, and suggest a feasible adaptation could be for infrastructures to appoint external stakeholder representatives to their boards with a specific remit to act in the wider public interest.
Abstract: An essential part of the financial system is its infrastructure: for example, payment systems, securities settlement systems, central counterparties and messaging services. These enable transactions ranging from retail payments through to business in domestic and international wholesale financial markets. Given this, were any such system to fail, this could affect the whole economy. This threat to financial stability largely explains why central banks seek to ensure - via their "oversight" role - that financial infrastructures take sufficient measures to mitigate risk. This paper explores the role of governance of infrastructures in the management of systemic risk. We do this by considering the case of a generic infrastructure provider operating under different forms of ownership. We show that, in the presence of consumption externalities, the level of risk mitigation chosen by the infrastructure provider is less than socially optimal. We then show that governance may have a role in adapting a provider's decision-making process to take due account of their risk externalities and, hence, provide a more socially optimal level of risk mitigation. Specifically, we suggest a feasible adaptation could be for infrastructures to appoint external stakeholder representatives to their boards with a specific remit to act in the wider public interest.

5 citations

References
More filters
Book•
An introduction to the bootstrap

[...]

Bradley Efron1, Robert Tibshirani•
South Dakota School of Mines and Technology1
01 Jan 1993
TL;DR: This article presents bootstrap methods for estimation, using simple arguments, with Minitab macros for implementing these methods, as well as some examples of how these methods could be used for estimation purposes.
Abstract: This article presents bootstrap methods for estimation, using simple arguments. Minitab macros for implementing these methods are given.

37,183 citations

Book•
Nonparametric statistics for the behavioral sciences

[...]

Sidney Siegel
01 Jan 1956
TL;DR: This is the revision of the classic text in the field, adding two new chapters and thoroughly updating all others as discussed by the authors, and the original structure is retained, and the book continues to serve as a combined text/reference.
Abstract: This is the revision of the classic text in the field, adding two new chapters and thoroughly updating all others. The original structure is retained, and the book continues to serve as a combined text/reference.

35,552 citations

Journal Article•DOI•
z-Tree: Zurich toolbox for ready-made economic experiments

[...]

Urs Fischbacher
07 Feb 2007-Experimental Economics
TL;DR: Z-Tree as mentioned in this paper is a toolbox for ready-made economic experiments, which allows programming almost any kind of experiments in a short time and is stable and easy to use.
Abstract: z-Tree (Zurich Toolbox for Ready-made Economic Experiments) is a software for developing and conducting economic experiments. The software is stable and allows programming almost any kind of experiments in a short time. In this article, I present the guiding principles behind the software design, its features, and its limitations.

9,760 citations

Journal Article•DOI•
A theory of fairness, competition and cooperation

[...]

Ernst Fehr1, Klaus M. Schmidt2•
University of Zurich1, Ludwig Maximilian University of Munich2
01 Aug 1999-Quarterly Journal of Economics
TL;DR: This paper showed that if some people care about equity, the puzzles can be resolved and that the economic environment determines whether the fair types or the selesh types dominate equilibrium behavior in cooperative games.
Abstract: There is strong evidence that people exploit their bargaining power in competitivemarkets butnot inbilateral bargainingsituations. Thereisalsostrong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish free riders, stable cooperation is maintained, although punishment is costly for those who punish. This paper asks whether there is a simple common principle that can explain this puzzling evidence. We show that if some people care about equity the puzzles can be resolved. It turns out that the economic environment determines whether the fair types or the selesh types dominate equilibrium behavior.

8,783 citations

Journal Article•DOI•
The Pure Theory of Public Expenditure

[...]

Paul A. Samuelson
01 Nov 1954-The Review of Economics and Statistics
TL;DR: In this paper, the authors propose a method to use the information of the user's interaction with the service provider in order to improve the quality of the service provided to the user.
Abstract: Классическая работа лаурета Нобелевской премии по экономике Пола Самуэльсона, заложившая основу современной теории общественных благ. В статье формулируются условия выбора оптимального объема предоставления общественного блага, ныне присутствующие в любом учебнике микроэкономики и экономики общественного сектора.

6,105 citations

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A theory of fairness, competition and cooperation

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01 Sep 2000-The American Economic Review
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z-Tree: Zurich toolbox for ready-made economic experiments

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07 Feb 2007-Experimental Economics
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Public Goods: A Survey of Experimental Research

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31 Dec 1995-Research Papers in Economics
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Motivation, Knowledge Transfer, and Organizational Forms

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