Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/55542
Authors: 
Gerber, Anke
Neitzel, Jakob
Wichardt, Philipp Christoph
Year of Publication: 
2012
Series/Report no.: 
CESifo working paper: Behavioural Economics 3733
Abstract: 
This paper considers the endogenous formation of an institution to provide a public good. If the institution governs only its members, players have an incentive to free ride on the institution formation of others and the social dilemma is simply shifted to a higher level. Addressing this second-order social dilemma, we study the effectiveness of three different minimum participation requirements: 1. full participation / unanimity rule; 2. partial participation; 3. unanimity first and in case of failure partial participation. While unanimity is most effective once established, one might suspect that a weaker minimum participation rule is preferable in practice as it might facilitate the formation of the institution. The data of our laboratory experiment do not support this latter view, though. In fact, weakening the participation requirement does not increase the number of implemented institutions. Thus, we conclude that the most effective participation requirement is the unanimity rule which leaves no room for free riding on either level of the social dilemma.
Subjects: 
public goods
coalition formation
endogenous institutions
JEL: 
C72
C92
H41
D02
Document Type: 
Working Paper

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