Centre for European Economic Research
NBER Working Papers and Publications
|May 2010||On the Formation of Coalitions to Provide Public Goods - Experimental Evidence from the Lab|
with Andreas Lange, Bodo Sturm: w15967
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...