IDEAS home Printed from https://ideas.repec.org/p/pbs/ecofin/2021-01.html
   My bibliography  Save this paper

Predicting Efficiency in Threshold Public Good Games: A Learning Direction Theory Approach

Author

Listed:
  • Federica Alberti

    (University of Portsmouth)

  • Anna Cartwright

    (Coventry University)

  • Edward Cartwright

    (De Montfort University)

Abstract

In this paper we propose a tractable model of behavior in threshold public good games. The model is based on learning direction theory. We find that individual behavior is consistent with the predictions of the model. Moreover, the model is able to accurately predict the success rate of groups in providing the public good. We apply this to give novel insight on the assurance problem by showing that the problem (of coordinating on the inefficient equilibrium of no contributions) is only likely with a relatively low endowment. In developing the model we compare and contrast best reply learning and impulse balance theory. Our results suggest that best reply learning provides a marginally better fit with the data.

Suggested Citation

  • Federica Alberti & Anna Cartwright & Edward Cartwright, 2021. "Predicting Efficiency in Threshold Public Good Games: A Learning Direction Theory Approach," Working Papers in Economics & Finance 2021-01, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    • Handle: RePEc:pbs:ecofin:2021-01
    as

    Download full text from publisher

    File URL: http://repec.port.ac.uk/EconFinance/PBSEconFin_2021_01.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Palfrey, Thomas R. & Rosenthal, Howard, 1984. "Participation and the provision of discrete public goods: a strategic analysis," Journal of Public Economics, Elsevier, vol. 24(2), pages 171-193, July.
    2. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
    3. Doruk İriş & Jungmin Lee & Alessandro Tavoni, 2019. "Delegation and Public Pressure in a Threshold Public Goods Game," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1331-1353, November.
    4. Edward Cartwright & Anna Stepanova & Lian Xue, 2019. "Impulse balance and framing effects in threshold public good games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(5), pages 903-922, October.
    5. Anat R. Admati & Motty Perry, 1991. "Joint Projects without Commitment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 259-276.
    6. Selten, Reinhard & Stoecker, Rolf, 1986. "End behavior in sequences of finite Prisoner's Dilemma supergames A learning theory approach," Journal of Economic Behavior & Organization, Elsevier, vol. 7(1), pages 47-70, March.
    7. Rachel Croson & Melanie Marks, 2000. "Step Returns in Threshold Public Goods: A Meta- and Experimental Analysis," Experimental Economics, Springer;Economic Science Association, vol. 2(3), pages 239-259, March.
    8. Mark Bagnoli & Barton L. Lipman, 1989. "Provision of Public Goods: Fully Implementing the Core through Private Contributions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(4), pages 583-601.
    9. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
    10. Sebastian J. Goerg & Tibor Neugebauer & Abdolkarim Sadrieh, 2016. "Impulse Response Dynamics in Weakest Link Games," German Economic Review, Verein für Socialpolitik, vol. 17(3), pages 284-297, August.
    11. Federica Alberti, 2015. "Does the Endowment of Contributors Make a Difference in Threshold Public-Good Games?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 71(2), pages 216-239, June.
    12. Selten, Reinhard, 1998. "Features of experimentally observed bounded rationality," European Economic Review, Elsevier, vol. 42(3-5), pages 413-436, May.
    13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    14. Federica Alberti & Edward J. Cartwright, 2016. "Full agreement and the provision of threshold public goods," Public Choice, Springer, vol. 166(1), pages 205-233, January.
    15. Charles Cadsby & Rachel Croson & Melanie Marks & Elizabeth Maynes, 2008. "Step return versus net reward in the voluntary provision of a threshold public good: An adversarial collaboration," Public Choice, Springer, vol. 135(3), pages 277-289, June.
    16. Ockenfels, Axel & Selten, Reinhard, 2005. "Impulse balance equilibrium and feedback in first price auctions," Games and Economic Behavior, Elsevier, vol. 51(1), pages 155-170, April.
    17. Spencer, Michael A. & Swallow, Stephen K. & Shogren, Jason F. & List, John A., 2009. "Rebate rules in threshold public good provision," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 798-806, June.
    18. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
    19. Ockenfels, Axel & Selten, Reinhard, 2014. "Impulse balance in the newsvendor game," Games and Economic Behavior, Elsevier, vol. 86(C), pages 237-247.
    20. Stefano Barbieri & David Malueg, 2008. "Private provision of a discrete public good: efficient equilibria in the private-information contribution game," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(1), pages 51-80, October.
    21. Cason, Timothy N. & Zubrickas, Robertas, 2017. "Enhancing fundraising with refund bonuses," Games and Economic Behavior, Elsevier, vol. 101(C), pages 218-233.
    22. Edward Cartwright & Anna Stepanova, 2017. "Efficiency in a forced contribution threshold public good game," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(4), pages 1163-1191, November.
    23. Didier Laussel & Thomas R. Palfrey, 2003. "Efficient Equilibria in the Voluntary Contributions Mechanism with Private Information," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(3), pages 449-478, July.
    24. Hudik, Marek & Chovanculiak, Robert, 2018. "Private provision of public goods via crowdfunding §," Journal of Institutional Economics, Cambridge University Press, vol. 14(1), pages 23-44, February.
    25. Makris, Miltiadis, 2009. "Private provision of discrete public goods," Games and Economic Behavior, Elsevier, vol. 67(1), pages 292-299, September.
    26. Bagnoli, Mark & McKee, Michael, 1991. "Voluntary Contribution Games: Efficient Private Provision of Public Goods," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 351-366, April.
    27. Cadsby, Charles Bram & Maynes, Elizabeth, 1999. "Voluntary provision of threshold public goods with continuous contributions: experimental evidence," Journal of Public Economics, Elsevier, vol. 71(1), pages 53-73, January.
    28. Cartwright, Edward & Stepanova, Anna, 2015. "The consequences of a refund in threshold public good games," Economics Letters, Elsevier, vol. 134(C), pages 29-33.
    29. James Andreoni & Laura Gee, 2015. "Gunning for efficiency with third party enforcement in threshold public goods," Experimental Economics, Springer;Economic Science Association, vol. 18(1), pages 154-171, March.
    30. Reinhard Selten & Thorsten Chmura, 2008. "Stationary Concepts for Experimental 2x2-Games," American Economic Review, American Economic Association, vol. 98(3), pages 938-966, June.
    31. Drew Fudenberg & David K. Levine, 1998. "The Theory of Learning in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061945, April.
    32. Au, Wing Tung & Chen, Xiao-Ping & Komorita, S. S., 1998. "A Probabilistic Model of Criticality in a Sequential Public Good Dilemma," Organizational Behavior and Human Decision Processes, Elsevier, vol. 75(3), pages 274-293, September.
    33. Stefano Barbieri & David A. Malueg, 2008. "Private Provision of a Discrete Public Good: Continuous‐Strategy Equilibria in the Private‐Information Subscription Game," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(4), pages 529-545, August.
    34. Rapoport, Amnon, 1985. "Provision of Public Goods and the MCS Experimental Paradigm," American Political Science Review, Cambridge University Press, vol. 79(1), pages 148-155, March.
    35. Marks, Melanie & Croson, Rachel, 1998. "Alternative rebate rules in the provision of a threshold public good: An experimental investigation," Journal of Public Economics, Elsevier, vol. 67(2), pages 195-220, February.
    36. Offerman, Theo & Sonnemans, Joep & Schram, Arthur, 2001. "Expectation Formation in Step-Level Public Good Games," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 250-269, April.
    37. Spiller, Jörg & Bolle, Friedel, 2017. "Experimental investigations of binary threshold public good games," Discussion Papers 393, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    38. R. Isaac & David Schmidtz & James Walker, 1989. "The assurance problem in a laboratory market," Public Choice, Springer, vol. 62(3), pages 217-236, September.
    39. Coats, Jennifer C. & Gronberg, Timothy J. & Grosskopf, Brit, 2009. "Simultaneous versus sequential public good provision and the role of refunds -- An experimental study," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 326-335, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edward Cartwright & Anna Stepanova, 2017. "Efficiency in a forced contribution threshold public good game," International Journal of Game Theory, Springer;Game Theory Society, vol. 46(4), pages 1163-1191, November.
    2. Zhi Li & Dongsheng Chen & Pengfei Liu, 2023. "Assurance payments on the coordination of threshold public goods provision: An experimental investigation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 407-436, April.
    3. Federica Alberti & Edward J. Cartwright, 2016. "Full agreement and the provision of threshold public goods," Public Choice, Springer, vol. 166(1), pages 205-233, January.
    4. Maoliang Ye & Jie Zheng & Plamen Nikolov & Sam Asher, 2020. "One Step at a Time: Does Gradualism Build Coordination?," Management Science, INFORMS, vol. 66(1), pages 113-129, January.
    5. Edward Cartwright & Anna Stepanova & Lian Xue, 2019. "Impulse balance and framing effects in threshold public good games," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(5), pages 903-922, October.
    6. Federica Alberti & Edward J. Cartwright & Anna Stepanova, 2012. "Threshold public good games and impulse balance theory," Jena Economics Research Papers 2011-062, Friedrich-Schiller-University Jena.
    7. Krasteva, Silvana & Yildirim, Huseyin, 2013. "(Un)Informed charitable giving," Journal of Public Economics, Elsevier, vol. 106(C), pages 14-26.
    8. An, Yonghong & Hu, Yingyao & Liu, Pengfei, 2018. "Estimating heterogeneous contributing strategies in threshold public goods provision: A structural analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 124-146.
    9. Zhi Li & Christopher Anderson & Stephen K. Swallow, 2012. "Uniform Price Mechanisms for Threshold Public Goods Provision: An Experimental Investigation," Working Papers 14, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    10. Corazzini, Luca & Cotton, Christopher & Valbonesi, Paola, 2015. "Donor coordination in project funding: Evidence from a threshold public goods experiment," Journal of Public Economics, Elsevier, vol. 128(C), pages 16-29.
    11. Li, Zhi & Anderson, Christopher M. & Swallow, Stephen, 2012. "Uniform Price Mechanisms for Threshold Public Goods Provision: An Experimental Investigation," Working Paper series 148349, University of Connecticut, Charles J. Zwick Center for Food and Resource Policy.
    12. Li, Zhi & Anderson, Christopher M. & Swallow, Stephen K., 2016. "Uniform price mechanisms for threshold public goods provision with complete information: An experimental investigation," Journal of Public Economics, Elsevier, vol. 144(C), pages 14-26.
    13. Krasteva, Silvana & Yildirim, Huseyin, 2014. "Reprint of: (Un)Informed charitable giving," Journal of Public Economics, Elsevier, vol. 114(C), pages 108-120.
    14. Luca Corazzini & Christopher Cotton & Paola Valbonesi, 2013. "Too many charities? Insight from an experiment with multiple public goods and contribution thresholds," Working Papers 2013-13, University of Miami, Department of Economics.
    15. Ansink, Erik & Koetse, Mark & Bouma, Jetske & Hauck, Dominic & van Soest, Daan, 2022. "Crowdfunding conservation (and other public goods)," Other publications TiSEM 2c89012d-69e5-4387-9e8d-9, Tilburg University, School of Economics and Management.
    16. Feige, Christian, 2015. "Success rates in simplified threshold public goods games: A theoretical model," Working Paper Series in Economics 70, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    17. Yin, Xile & Li, Jianbiao & Bao, Te, 2019. "Does overconfidence promote cooperation? Theory and experimental evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 79(C), pages 119-133.
    18. Luca Corazzini, Christopher Cotton, Paola Valbonesi, 2012. "Salience, Coordination and Cooperation in Contributing to Threshold Public Goods," ISLA Working Papers 44, ISLA, Centre for research on Latin American Studies and Transition Economies, Universita' Bocconi, Milano, Italy.
    19. Julian Rauchdobler & Rupert Sausgruber & Jean-Robert Tyran, 2010. "Voting on Thresholds for Public Goods: Experimental Evidence," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 66(1), pages 34-64, March.
    20. James Andreoni & Laura Gee, 2015. "Gunning for efficiency with third party enforcement in threshold public goods," Experimental Economics, Springer;Economic Science Association, vol. 18(1), pages 154-171, March.

    More about this item

    Keywords

    public good; threshold; learning direction theory; impulse balance theory; counterfactual thinking;
    All these keywords.

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pbs:ecofin:2021-01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Shuonan Zhang (email available below). General contact details of provider: https://edirc.repec.org/data/depbsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.