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Asset Markets and Equilibrium Selection in Public Goods Games with Provision Points: An Experimental Study

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  • Bruno Broseta
  • Enrique Fatas
  • Tibor Neugebauer

Abstract

We report experimental results on the effects that auctioning the right to play a public goods game with a provision point may have on equilibrium selection and individual behavior. Auctioning off such a right among a larger population of players strikingly enhances public good provision. Once public good provision is obtained, the auction price at the preliminary stage increases to its upper limit, dissipating all players' gains associated with the provision of the public good. Individual deviations from the equilibrium strategy are neither able to force lower market prices nor to affect provision of the public good in subsequent periods. (JEL C72, C92, H41) Copyright 2003, Oxford University Press.

Suggested Citation

  • Bruno Broseta & Enrique Fatas & Tibor Neugebauer, 2003. "Asset Markets and Equilibrium Selection in Public Goods Games with Provision Points: An Experimental Study," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 574-591, October.
    • Handle: RePEc:oup:ecinqu:v:41:y:2003:i:4:p:574-591
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    1. Mark Isaac, R. & McCue, Kenneth F. & Plott, Charles R., 1985. "Public goods provision in an experimental environment," Journal of Public Economics, Elsevier, vol. 26(1), pages 51-74, February.
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    Cited by:

    1. A. Arrighetti & S. Curatolo, 2010. "Opportunismo e coordinamento: soluzioni regolative e istituzionali," Economics Department Working Papers 2010-EP02, Department of Economics, Parma University (Italy).
    2. Antonio J. Morales & Javier Rodero-Cosano, 2023. "Forward induction and market entry with an endogenous outside option," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(2), pages 365-383, August.
    3. Choo, Lawrence & Zhou, Xiaoyu, 2019. "Can market competition reduce anomalous behaviours," FAU Discussion Papers in Economics 08/2019, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    4. Jason Shachat & J. Todd Swarthout, 2013. "Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection," Games, MDPI, vol. 4(4), pages 1-16, November.
    5. Choo, Lawrence, 2016. "Market competition for decision rights: An experiment based on the “Hat Puzzle Problem”," MPRA Paper 73408, University Library of Munich, Germany.
    6. Jordi Brandts & Antonio Cabrales & Gary Charness, 2007. "Forward induction and entry deterrence: an experiment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 183-209, October.
    7. Jia Liu & Yohanes E. Riyanto, 2017. "The limit to behavioral inertia and the power of default in voluntary contribution games," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(4), pages 815-835, April.
    8. Rachel Croson & Enrique Fatas & Tibor Neugebauer, 2006. "An Experimental Analysis Of Conditional Cooperation," Working Papers. Serie AD 2006-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    9. Enrique Fatas & Juan Mañez, 2007. "Are low-price promises collusion guarantees? An experimental test of price matching policies," Spanish Economic Review, Springer;Spanish Economic Association, vol. 9(1), pages 59-77, March.
    10. Choo, Lawrence & Zhou, Xiaoyu, 2022. "Can market selection reduce anomalous behaviour in games?," European Economic Review, Elsevier, vol. 141(C).
    11. Chlaß, Nadine & Perea, Andrés, 2016. "How do people reason in dynamic games?," VfS Annual Conference 2016 (Augsburg): Demographic Change 145881, Verein für Socialpolitik / German Economic Association.
    12. Choo, Lawrence & Kaplan, Todd R. & Zhou, Xiaoyu, 2019. "Can auctions select people by their level-k types?," MPRA Paper 95987, University Library of Munich, Germany.
    13. repec:wyi:journl:002215 is not listed on IDEAS
    14. Cooper, David J. & Ioannou, Christos A. & Qi, Shi, 2018. "Endogenous incentive contracts and efficient coordination," Games and Economic Behavior, Elsevier, vol. 112(C), pages 78-97.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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