Public goods provision by asymmetric agents: experimental evidence

Abstract

Economic theory predicts that individuals will free-ride, providing sub-optimal Nash equilibrium quantities of public goods. However, 25 years of experimental evidence indicates that individuals’ behavior often differs from the Nash prediction. This experiment examines provision in the context of asymmetric benefits and asymmetric costs of providing a public good with declining marginal benefits and increasing marginal costs. The design eliminates the coordination problem at the individual level inherent in previous declining marginal benefit experiments. Yet, even with the improved theoretical design, over-contribution persists, suggesting that it is a behavioral phenomenon rather than a design artifact. Analysis of individual contributions indicates that subjects’ responses to asymmetry match the theoretical prediction in 3 out of 4 single asymmetry cases. Thus, although over-contribution remains, the theoretical role of asymmetry is confirmed.