Providing Public Goods Without Strong Sanctioning Institutions

Anke Gerber and Philipp Wichardt

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: This paper proposes a simple mechanism aimed to establish positive contributions to public goods in the absence of powerful institutions to sanction free-riders. The idea of the mechanism is to require players to commit to the public good by paying a deposit prior to the contribution stage. If all players commit in this way, those players who do not contribute their share to the public good forfeit their deposit. If there is no universal commitment, all deposits are refunded and the standard game is played. Given deposits are sufficiently high, prior commitment and full ex post contributions are part of a strict subgame perfect Nash equilibrium for the resulting game. As the mechanism obviates the need for any ex post prosecution of free-riders, it is particularly suited for situations where players do not submit to a common authority as in the case of international agreements.

Keywords: public goods; cooperation; institutions; Climate-Change Treaties (search for similar items in EconPapers)
JEL-codes: C72 D61 (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-gth, nep-pbe and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:194

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