Standard Public Goods Research Articles

Efficiency vs. Stability in Climate Coalitions: A Conceptual and Computational Appraisal

This paper evaluates with numerical computations the respective merits of two competing notions of coalition stability in the standard global public goods model of climate change. To this effect it uses the CWS integrated assessment model. After a reminder of the two game theoretical stability notions involved—core-stability and internal-external stability—and of the CWS model, the former property is shown to hold for the grand coalition if resource transfers of a specific form between countries are introduced. The latter property appears to hold neither for the grand coalition nor for most large coalitions whereas it is verified for most small coalitions in a weak sense that involves transfers. Finally, coalitions, stable in either sense, that perform best in terms of carbon concentration and global welfare are always heterogeneous ones. Therefore, if coalitional stability is taken as an objective, promoting small or homogeneous coalitions is not to be recommended.

Microfoundations of Social Capital

We show that the standard trust question routinely used in social capital research is importantly related to cooperation behavior and we provide a microfoundation for this relation. We run a large-scale public goods experiment over the internet in Denmark and find that the trust question is a proxy for cooperation preferences rather than beliefs about others’ cooperation. To disentangle the preference and belief channels, we run a (standard) public goods game in which beliefs matter for cooperation choices and one (using the strategy method) in which they do not matter. We show that the “fairness question”, a recently proposed alternative to the “trust question”, is also related to cooperation behavior but operates through beliefs rather than preferences.

The Group Size Paradox Revisited

AbstractEsteban and Ray (2001)model an increasing marginal cost of effort in providing a public good. If the marginal cost of contribution function has an elasticity greater than 1, then the level of provision is increasing in group size, regardless of the degree of rivalry of the public good. We modify their model to a standard public goods setting, where their results continue to hold. We then add small fixed costs of participation to the model. If the good is sufficiently rival, one ofOlson's (1965)central propositions is restored: public goods will fail to be provided in large groups.

Climate Coalitions: A Theoretical and Computational Appraisal

Using an updated version of the CWS model (introduced by Eyckmans and Tulkens in Resource and Energy Economics 2003), this paper intends to evaluate with numbers the respective merits of two competing notions of coalition stability in the standard global public goods model as customarily applied to the climate change problem. After a reminder of the model structure and of the definition of the two game theoretical stability notions involved - namely, core stability and internal-external stability, the former property is shown to hold for the grand coalition in the CWS model only if resource transfers of a specific form between countries are introduced. It is further shown that while the latter property holds neither for the grand coalition nor for most large coalitions, it is nevertheless verified in a weak sense that involves transfers (dubbed potential internal stability) for most small coalitions. The reason for this difference is brought to light, namely the differing rationale that inspires the transfers in either case. Finally, it is shown that the stable coalitions that perform best (in terms of carbon concentration and global welfare) are always composed of both industrialized and developing countries. Two sensitivity analyses confirm the robustness of all these results.

House money effects in public good experiments: Comment

We reconsider evidence from experiments that claim to show that using “house money” in standard public goods experiments has no effect on behavior. We show that it does have an effect when one examines the data using appropriate statistical methods that consider individual-level responses and account for the error structure of the panel data.

Like Mother Like Son? Experimental Evidence on the Transmission of Values from Parents to Children

This paper studies whether prosocial values are transmitted from parents to their children. We do so through an economic experiment, in which a group of Hispanic and African American families play a standard public goods game. The experimental data presents us with a surprising result. We find no significant correlation between the degree of cooperation of a child and that of his or her parents. Such lack of cooperation is robust across age groups, sex, family size and different estimation strategies. This contrasts with the typical assumption made by the theoretical economic literature on the inter-generational transmission of values. The absence of correlation between parents' and children's behavior, however, is consistent with part of the psychological literature, which emphasizes the importance of peer effects in the socialization process.

The individual behaviour in a public goods game

Generally, with a standard linear public goods game, one observes at the aggregate level that contributions lay between the Nash equilibrium and the social optimum and decrease over time with and end-effect. The purpose of this paper is to see whether these general aggregate results remain available at the group and at the individual levels. At this purpose, six groups of four persons were formed and made to play a public goods game. At the aggregate level, it was found that obtained results corresponded almost to the standard experimental findings in the literature. Using the classification by Isaac, Walker and Thomas ({dy1984}), it was found that at the group level only two groups adopted the standard behaviour and only two groups presented a behaviour similar to what it was obtained at the aggregate level. At the individual level, contributions over time of each subject to the group were compared to the aggregate results and classified into types. Only in one of the six groups individuals adopted an homogeneous behaviour, meantime in the other five groups individuals conducted different behaviours.

Peer-to-peer file sharing communities

Peer-to-peer file sharing communities present a paradox for standard public goods theory, which predicts that free-riding should preclude the success of the community. We present a model in which users choose their level of sharing, downloading, and listening in the presence of sharing costs and endogenous downloading costs. In our model, sharing emerges endogenously, largely as a byproduct of users' attempts to reduce own-costs.

The Effect of Communication Media on Cooperation

Abstract We examine how communication affects cooperation with the help of seven standard public goods experiments that only differ with respect to the medium of pre-play communication. Our treatments include bidirectional and unidirectional communication via (mostly electronic) auditory and/or visual channels. The results suggest that successful cooperation is attributable to the opportunity of ‘coordinating’ behavior in the communication phase. Furthermore, both the level and the stability of cooperation significantly interact with the communication medium, even though the content of communication is remarkably similar across the communication treatments.

Linear Public Goods Experiments: A Meta-Analysis

Objective :T ouse meta-analysis techniques to assess the impact of various factors on the extent of cooperation in standard linear public goods experiments using the voluntary contributions mechanism. Data Sources: Potentially relevant experiments were identified through searches of EconLit, the Internet Documents in Economics Access Service (IDEAS), and a survey article. Review Methods :A total of 349 potentially relevant studies were identified. Of these, 27 (representing a total of 711 groups of participants) met the inclusion criteria. Data were abstracted from these studies using a standardized protocol. Results were analyzed using weighted ordinary least squares. Average group efficiency was the dependent variable. Results: The marginal per capita return, communication, constant group composition over the session (“partners”), positive framing, and the use of children as subjects had a positive and significant effect ( p < 0.05) on the average level of contribution to the public good. Heterogeneous endowments to subjects, experienced participants, and soliciting subjects’ beliefs regarding other participants’ behaviour prior to the start of the session/period had an egative and significant effect. A number of other factors were not identified as significant. Conclusion: The meta-analysis results parallel several key findings from previous literature reviews. In addition, they offer parameter estimates and an analysis of significance based on the totality of the available research evidence. More consistent reporting of the results of experiments would greatly improve the ability to conduct this type of research.

Punishment in a Regulatory Setting: Experimental Evidence from the VCM

To analyze the effectiveness of punishment in inducing regulatory compliance, we modify a standard public goods experiment to include a financial penalty for free riding. The design allows us to vary both punishment probability and severity. We introduce the punishment mechanism in both a one-time and a repeated treatment and find that compliance (contributing to the public good) is increasing in expected punishment cost in both treatments. We also find that punishment severity has a larger effect on behavior than punishment probability. In the repeated treatment, we find that past punishment has a negative rather than positive effect on compliance.

Public Goods Provision: Applying Jackson–Moulin Mechanism for Restricted Agent Characteristics

I examine a standard public goods provision problem and show that a simple adaptation of the Jackson–Moulin mechanism (J. Econ. Theory57(1992), 125–140) to divisible public goods achieves the socially efficient outcome and implements a family of cost-sharing rules in undominated Nash equilibria of a two-stage game, when agents' benefits from public good consumption are linear. Agents know their own marginal benefits and at least two agents with positive marginal benefits know the aggregate marginal benefit. The planner, however, does not know agents' characteristics or aggregate marginal benefit.Journal of Economic LiteratureClassification Numbers: H41, C72, D78.

New Product Development and the Optimal Duration of Patents

Economists and policy makers have always argued that the patent system is necessary for a growing economy despite the fact that temporary monopoly rights to innovators imply a distortion of the price system. However, economists have not yet come up with a unified theory to determine the optimal duration of patents. In this paper, we develop a simple dynamic model which identifies two important welfare effects of the patent system, the effect on the incentive to innovate and that of the price distortion caused by the monopoly rights of patent holders. Using this framework, we analyze the factors which determine the optimal duration of patents awarded to new product developers. We argue that the possibility of a finite optimal patent life does not arise in the literature on product development since it considers only a constant returns to scale technology for developing new products. We first confirm the optimality of an infinite patent life for this technology and then show that if the cost of developing new products is increasing with the rate of instantaneous product development then the optimal patent life for economies with a population growth rate less than the interest rate is finite. In addition, we show that for economies with population growth rate exceeding the interest rate, the optimal patent life may also be finite provided that the degree of product substitution is sufficiently high. The patent system can be viewed as a method of assigning property rights to innovators in order to encourage research and development. Theoretically, the optimal R&D level can be tackled using a standard public goods analysis (such as the problem of financing a new bridge) yielding a result that optimal allocations can be achieved at the cost of a significant amount of government intervention. Perhaps for this reason most decentralized societies have chosen a different way to motivate people to engage in R&D, and this is done by assigning temporary monopoly rights to innovators.

Local public goods and private suppliers: Musical suburbs replayed

This paper deals with the existence of private market suppliers in a standard local public goods model. The result of this modification can be a cycling process instigated by rich households rather than poor households. The theoretical model provides empirical implications for capitalization studies and policy implications for the provision and financing of local public goods including education.