Hostname: page-component-7b9c58cd5d-9k27k Total loading time: 0 Render date: 2025-03-16T21:57:22.772Z Has data issue: false hasContentIssue false

Gunning for efficiency with third party enforcement in threshold public goods

Published online by Cambridge University Press:  14 March 2025

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

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.

Type
Original Paper
Copyright
Copyright © 2014 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

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.

References

Anderson, C. M., & Putterman, L. (2006). Do non-strategic sanctions obey the law of demand? The demand for punishment in the voluntary contribution mechanism. Games and Economic Behavior, 54(1), 124. 10.1016/j.geb.2004.08.007CrossRefGoogle Scholar
Andreoni, J., Croson, R. Plott, C. R., & Smith, V. L. (2008). Partners versus strangers: random rematching in public goods experiments. Handbook of experimental economics results, Amsterdam: Elsevier 776783. 10.1016/S1574-0722(07)00082-0 Chap. 82.CrossRefGoogle Scholar
Andreoni, J., & Gee, L. K. (2012). Gun for hire: delegated enforcement and peer punishment in public goods provision. Journal of Public Economics, 96(11–12), 10361046. 10.1016/j.jpubeco.2012.08.003CrossRefGoogle Scholar
Andreoni, J., & Miller, J. (2002). Giving according to GARP: an experimental test of the consistency of preferences for altruism. Econometrica, 70(2), 737753. 10.1111/1468-0262.00302CrossRefGoogle Scholar
Bagnoli, M., & Lipman, B. L. (1989). Provision of public goods: fully implementing the core through private contributions. Review of Economic Studies, 56(4), 583601. 10.2307/2297502CrossRefGoogle Scholar
Bolton, G. E., & Ockenfels, A. (2000). ERC: a theory of equity, reciprocity, and competition. The American Economic Review, 90(1), 166193. 10.1257/aer.90.1.166CrossRefGoogle Scholar
Bornstein, G., Gneezy, U., & Nagel, R. (2002). The effect of intergroup competition on group coordination: an experimental study. Games and Economic Behavior, 41(1), 125. 10.1016/S0899-8256(02)00012-XCrossRefGoogle Scholar
Cadsby, C. B., & Maynes, E. (1999). Voluntary provision of threshold public goods with continuous contributions: experimental evidence. Journal of Public Economics, 71(1), 5373. 10.1016/S0047-2727(98)00049-8CrossRefGoogle Scholar
Cadsby, C. B., Croson, R., Marks, M., & Maynes, E. (2008). Step return versus net reward in the voluntary provision of a threshold public good: an adversarial collaboration. Public Choice, 135(3/4), 277289. 10.1007/s11127-007-9260-zCrossRefGoogle Scholar
Coats, J. C., Gronberg, T. J., & Grosskopf, B. (2009). Simultaneous versus sequential public good provision and the role of refunds—an experimental study. Journal of Public Economics, 93(1–2), 326335. 10.1016/j.jpubeco.2008.06.002CrossRefGoogle Scholar
Corazzini, L., Cotton, C., & Valbonesi, P. (2013). Too many charities? Insight from an experiment with multiple public goods and contribution thresholds. Marco Fanno working paper.CrossRefGoogle Scholar
Croson, R., & Marks, M. (1999). The effect of heterogenous valuations for threshold pubic goods: an experimental study. Risk Decision and Policy, 99115.CrossRefGoogle Scholar
Croson, R., & Marks, M. (2000). Step returns in threshold public goods: a meta- and experimental analysis. Experimental Economics, 2(3), 239259.CrossRefGoogle Scholar
Croson, R., & Marks, M. (2001). The effect of recommended contributions in the voluntary provision of public goods. Economic Inquiry, 39(2), 238249. 10.1111/j.1465-7295.2001.tb00063.xCrossRefGoogle Scholar
Dawes, R. M., Orbell, J. M., Simmons, R. T., & Van De Kragt, A. J. C. (1986). Organizing groups for collective action. American Political Science Review, 80(4), 11711185. 10.2307/1960862CrossRefGoogle Scholar
Engelmann, D., & Strobel, M. (2004). Inequality aversion, efficiency, and maximin preferences in simple distribution experiments. The American Economic Review, 94(4), 857869. 10.1257/0002828042002741CrossRefGoogle Scholar
Falkinger, J., Fehr, E., Gachter, S., & Winter-Ebmer, R. (2000). A simple mechanism for the efficient provision of public goods: experimental evidence. The American Economic Review, 90(1), 247264. 10.1257/aer.90.1.247CrossRefGoogle Scholar
Fehr, E., & Schmidt, K. M. (1999). A theory of fairness, competition, and cooperation. The Quarterly Journal of Economics, 114(3), 817868. 10.1162/003355399556151CrossRefGoogle Scholar
Fischbacher, U. (2007). Z-tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Ho, T.-H., Camerer, C., & Weigelt, K. (1998). Iterated dominance and iterated best response in experimental “p-beauty contests”. The American Economic Review, 88(4), 947969.Google Scholar
Isaac, R., Schmidtz, D., & Walker, J. (1989). The assurance problem in a laboratory market. Public Choice, 62, 217236. 10.1007/BF02337743CrossRefGoogle Scholar
Ledyard, J. Kagel, J., & Roth, A. (1995). Public goods: a survey of experimental research. Handbook of experimental economics, Princeton: Princeton University Press.Google Scholar
Marks, M., & Croson, R. (1998). Alternative rebate rules in the provision of a threshold public good: an experimental investigation. Journal of Public Economics, 67(2), 195220. 10.1016/S0047-2727(97)00067-4CrossRefGoogle Scholar
Marks, M., & Croson, R. (1999). The effect of incomplete information in a threshold public goods experiment. Public Choice, 99, 103118. 10.1023/A:1018316500800CrossRefGoogle Scholar
Nagel, R. (1995). Unraveling in guessing games: an experimental study. The American Economic Review, 85(5), 13131326.Google Scholar
Ostrom, E. (2001). Social dilemmas and human behavior. Economics in Nature, 2341. 10.1017/CBO9780511752421.004CrossRefGoogle Scholar
Ostrom, E., Walker, J., & Gardner, R. (1992). Covenants with and without a sword: self-governance is possible. American Political Science Review, 86(2), 404417. 10.2307/1964229CrossRefGoogle Scholar
Rapoport, A., & Suleiman, R. (1993). Incremental contribution in step-level public goods games with asymmetric players. Organizational Behavior and Human Decision Processes, 55(2), 171194. 10.1006/obhd.1993.1029CrossRefGoogle Scholar
Savikhin Samek, A., & Sheremeta, R. M. (2014). Recognizing contributors: an experiment on public goods. Experimental Economics.Google Scholar
Suleiman, R., & Rapoport, A. (1992). Provision of step-level public goods with continuous contribution. Journal of Behavioral Decision Making, 5(2), 133153. 10.1002/bdm.3960050205CrossRefGoogle Scholar
van Dijk, E., & Grodzka, M. (1992). The influence of endowments asymmetry and information level on the contribution to a public step good. Journal of Economic Psychology, 13(2), 329342. 10.1016/0167-4870(92)90037-8CrossRefGoogle Scholar
Yamagishi, T. (1986). The provision of a sanctioning system as a public good. Journal of Personality and Social Psychology, 51(1), 110116. 10.1037/0022-3514.51.1.110CrossRefGoogle Scholar
Supplementary material: File

Andreoni and Gee supplementary material

Instructions
Download Andreoni and Gee supplementary material(File)
File 346.4 KB