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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
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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.

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A theory of fairness, competition and cooperation

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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.

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A Theory of Fairness, Competition and Cooperation

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Ernst Fehr1•
University of Zurich1
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TL;DR: This article showed that if a fraction of the people exhibit inequality aversion, stable cooperation is maintained although punishment is costly for those who punish, and they also showed that when they are given the opportunity to punish free riders, stable cooperations are maintained.
Abstract: There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong 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 a fraction of the people exhibits inequality aversion the puzzles can be resolved.

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Cooperation and Punishment in Public Goods Experiments

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Ernst Fehr, Simon Gächter
01 Sep 2000-The American Economic Review
TL;DR: In this paper, the authors show that there is a widespread willingness of the cooperators to punish the free-riders, even if punishment is costly and does not provide any material benefits for the punisher.
Abstract: Casual evidence as well as daily experience suggest that many people have a strong aversion against being the 'sucker' in social dilemma situations. As a consequence, those who cooperate may be willing to punish free-riding, even if this is costly for them and even if they cannot expect future benefits from their punishment activities. A main purpose of this paper is to show experimentally that there is indeed a widespread willingness of the cooperators to punish the free-riders. Our results indicate that this holds true even if punishment is costly and does not provide any material benefits for the punisher. In addition, we provide evidence that free-riders are punished the more heavily the more they deviate from the cooperation levels of the cooperators. Potential free-riders, therefore, can avoid or at least reduce punishment by increasing their cooperation levels. This, in turn, suggests that in the presence of punishment opportunities there will be less free riding. Testing this conjecture is the other major aim of our paper.

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Fairness and Retaliation: The Economics of Reciprocity

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Ernst Fehr, Simon Gächter
01 Aug 2000-Journal of Economic Perspectives
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References
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Journal Article•DOI•
On the possibility of efficient private provision of public goods through government subsidies

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Georg Kirchsteiger1, Clemens Puppe1•
University of Vienna1
01 Dec 1997-Journal of Public Economics
TL;DR: In this paper, the authors investigated the possibility of implementing an efficient provision of a public good through distortionary tax-subsidy policies in a simple one-shot game of voluntary contributions.

38 citations

Journal Article•DOI•
Behavioral explanations of efficient public good allocations

[...]

Ronald M. Harstad1, Ronald M. Harstad2, Michael Marrese3•
University of Illinois at Urbana–Champaign1, Texas A&M University2, Northwestern University3
01 Dec 1982-Journal of Public Economics
TL;DR: In this paper, two alternative behavioral models, reservation behavior and satisficing behavior, were proposed to recognize the impact of the iterative process upon incentives, yet maintain some of the critical simplifications that have made Cournot behavior an attractive model.

34 citations

Journal Article•DOI•
Lindahl-equilibria as the outcome of a non-cooperative game

[...]

Wilhelm Althammer1, Wolfgang Buchholz1•
European University Viadrina1
01 Aug 1993-European Journal of Political Economy
TL;DR: In this paper, an error in an article by Danziger and Schnytzer (1991) recently published in this journal is corrected and the authors refer to a rather new and seemingly paradoxical result in the theory of public goods.

30 citations

Journal Article•DOI•
Implementation of mechanism by processes: Public good allocation experiments☆

[...]

Ronald M. Harstad1, Ronald M. Harstad2, Michael Marrese3•
University of British Columbia1, University of Illinois at Urbana–Champaign2, Northwestern University3
01 Jun 1981-Journal of Economic Behavior and Organization
TL;DR: In this paper, the design problem for decentralized public good provisions is outlined, hyothesized to be incomplete if the process, the informational logic of decision reaching is left unspecified, and experiments with the incentive-compatible Deficit mechanism and two different processes, Smith and Seriatim, are reported.
Abstract: The design problem for decentralized public good provisions is outlined, hyothesized to be incomplete if the process, the informational logic of decisionreaching is left unspecified. Experiments with the incentive-compatible Deficit mechanism and two different processes, Smith and Seriatim, are reported. More failures to agree are found with the Smith process, but neither set of experiments supports a hypothesis of outcomes approximating the Pareto-efficient, Cournot-Nash equilibrium allocation. This is hypothesized to result from the failure of the Deficit mechanism to balance the budget.

20 citations

Journal Article•DOI•
Taxation in an economy with private provision of public goods

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Johann K. Brunner, Josef Falkinger1•
University of Regensburg1
01 Nov 1999-Review of Economic Design
TL;DR: In this article, the effects of taxation and subsidies in an economy with private provision of a public good is analyzed. And the authors show that in a situation where all individuals contribute, taxation affects the equilibrium allocation if and only if at least one individual's voluntary contribution to the public good has an impact on the aggregate tax payments of the others.
Abstract: This paper analyses the effects of taxation and subsidies in an economy with private provision of a public good It is shown that in a situation where all individuals contribute, taxation affects the equilibrium allocation if and only if at least one individual's voluntary contribution to the public good has an impact on the aggregate tax payments of the others We then consider linear nonneutral tax-subsidy schemes and analyse efficiency and uniqueness of the resulting Nash equilibria We show that an efficient Nash equilibrium, where all individuals contribute, will in general not be unique, and establish a non-uniformity property which a tax-subsidy scheme must fulfil in order to induce a unique interior equilibrium that is efficient Throughout the paper it is assumed that individuals fully understand and take into account the government's budget constraint

18 citations

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