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Gunning for efficiency with third party enforcement in threshold public goods

Published online by Cambridge University Press:  14 March 2025

James Andreoni  and
Laura K. Gee
James Andreoni*
Affiliation:
Department of Economics, University of California, San Diego, La Jolla, CA 92093, USA NBER, 1050 Massachusetts Ave., Cambridge, MA 02138, USA
Laura K. Gee*
Affiliation:
Department of Economics, Tufts University, Medford, MA 02155, USA
*
andreoni@ucsd.edu
laura.gee@tufts.edu
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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 goodsExperimentLaboratoryEquilibrium selectionPunishmentFree riding

JEL classification

D7: Analysis of Collective Decision-Making H41: Public Goods H42: Publicly Provided Private Goods C91: Laboratory, Individual Behavior C92: Laboratory, Group Behavior C72: Noncooperative Games
Type
Original Paper
Information
Experimental Economics , Volume 18 , Issue 1: Special Issue In Honor of Elinor “Lin” Ostrom , March 2015 , pp. 154 - 171
Copyright
Copyright © 2014 Economic Science Association

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Footnotes

Electronic Supplementary Material The online version of this article (doi:https://doi.org/10.1007/s10683-014-9392-1) contains supplementary material, which is available to authorized users.

Andreoni would like to thank the National Science Foundation (SES-1024683), and the Science of Generousity Initiative for financial support. This research was approved by the UCSD IRB. We would also like to thank Mark Isaac, James Walker, two anonymous referees, Christopher Cotton, Jennifer Coats, Joseph Falkinger, Rosemarie Nagel, David Scmidtz, Jeff Zabel, and participants at the ESA and BABEEW conferences for their helpful comments.

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