The voluntary contribution mechanism with complementarity

• Main Author: Fenig, Guidon
• Language: English
• Published: University of British Columbia 2016
• Online Access: http://hdl.handle.net/2429/58724

This dissertation investigates the effect of complementarity in the private provision of public goods. The inclusion of complementarity in contributions transforms the classic voluntary contribution mechanism into a coordination game, in which we are able to study how different behavioral types interact. The first chapter generalizes the linear voluntary contribution mechanism case by allowing agents' contributions to be complements in production. When complementarity is sufficiently high, an additional full-contribution equilibrium emerges. We experimentally investigate subjects' behavior using a between-subject design that varies complementarity. When two equilibria exist, subjects tend to coordinate on contributions close to the efficient equilibrium. When complementarity is sizable but only a zero-contribution selfish-equilibrium exists, subjects persistently contribute above it. Observed choices and other nonchoice data indicate heterogeneity among subjects and two distinct types. Homo pecuniarius maximizes profits by best responding to beliefs, while Homo behavioralis identifies this strategy but chooses to deviate from it, sacrificing pecuniary rewards to support altruism or competitiveness. The second chapter studies the effect of introducing thresholds on equilibrium selection in the voluntary contribution mechanism with complementarity (VCMC). The introduction of thresholds expands the basin of attraction of the socially inefficient equilibrium by raising the minimum group output necessary for a positive return from cooperation. If contributions are not sufficient to generate the minimum output, the social return is zero. The data suggest that the introduction of thresholds does not alter the equilibrium selection or the pattern of contribution dynamics. Individuals are still able to coordinate on the socially preferable outcome. The third chapter examines experimentally the effect of displaying feedback about the income of other group members on the evolution of contributions in the VCMC. The results show that the degree of coordination responds to the way information about outcomes is made available to subjects. Emphasis on income differences can be detrimental from a social perspective and may result in the unraveling of cooperation. === Arts, Faculty of === Vancouver School of Economics === Graduate