Participation and Commitment in Voluntary Coalitions to Provide Public Goods

Abstract

This paper reports experimental evidence on the voluntary formation of coalitions to provide a public good. Participation and commitment in a coalition are either exogenously imposed or endogenously determined by the players themselves. We find larger voluntary participation rates when commitments in the coalition are endogenously determined using a minimum contribution rule rather than exogenously determined. However, due to a trade‐off between participation and commitment, coalitions with voluntary participation are less effective in facilitating cooperation compared to when all players are forced to participate. This paper therefore confirms the rather pessimistic conclusions from coalition formation theories.