TY  - JOUR
AU  - Dannenberg,Astrid
AU  - Lange,Andreas
AU  - Sturm,Bodo
TI  - On the Formation of Coalitions to Provide Public Goods - Experimental Evidence from the Lab
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15967
PY  - 2010
Y2  - May 2010
UR  - http://www.nber.org/papers/w15967
L1  - http://www.nber.org/papers/w15967.pdf
N1  - Author contact info:
Astrid Dannenberg
Centre for European Economic Research
L7,1
68161 Mannheim
Germany
E-Mail: dannenberg@zew.de

Andreas Lange
University of Hamburg
Department of Economics
Von Melle Park 5
20146 Hamburg
Germany
Tel: +49-40-42838-4035
Fax: +49-40-42838-3243
E-Mail: andreas.lange@wiso.uni-hamburg.de

Bodo Sturm
Leipzig University of Applied Science
P.O.Box 301166
04251 Leipzig
Germany
E-Mail: bodo.sturm@wiwi.htwk-leipzig.de
AB  - The provision of public goods often relies on voluntary contributions and cooperation. While most of the experimental literature focuses on individual contributions, many real-world problems involve the formation of institutions among subgroups (coalitions) of players. International agreements serve as one example. This paper experimentally tests theory on the formation of coalitions in different institutions and compares those to a voluntary contribution mechanism. The experiment confirms the rather pessimistic conclusions from the theory: only few players form a coalition when the institution prescribes the full internalization of mutual benefits of members. Contrary to theory, coalitions that try to reduce the free-riding incentives by requiring less provision from their members, do not attract additional members. Substantial efficiency gains occur, however, both along the extensive and intensive margin when coalition members can each suggest a minimum contribution level with the smallest common denominator being binding. The experiment thereby shows that the acceptance of institutions depends on how terms of coalitions are reached.
ER  -