Public Goods and Experimental Economics

A public good is a good that is non-excludable, meaning that it is impossible to prevent people from consuming it, and non-rivalrous, meaning that one person's consumption of the good does not reduce the amount available to others.

The tragedy of the commons is the tendency for individuals to overconsume a public good because they do not bear the full cost of their consumption.

Experimental economics is the study of economic behavior using controlled experiments. In an experimental economics experiment, researchers create a controlled environment in which they can observe the behavior of individuals in response to different economic incentives.

Experimental economics can be used to study public goods by creating a controlled environment in which individuals can make decisions about both how much to contribute to and how much to consume of a public good.

The free rider problem is the tendency for individuals to consume a public good without contributing to its provision. This can lead to a situation in which the public good is underprovided.

There are a number of mechanisms that can be used to address the free rider problem, including coercion, persuasion, and pricing.

The Lindahl mechanism is a mechanism for allocating public goods based on individual preferences. In a Lindahl mechanism, individuals are asked to reveal their preferences for different levels of the public good and then the public good is provided at the level that maximizes the sum of individual utilities.

The Groves-Clarke mechanism is a mechanism for allocating public goods based on individual contributions. In a Groves-Clarke mechanism, individuals are asked to reveal their preferences for different levels of the public good and then they are asked to make a contribution to the provision of the public good. The public good is then provided at the level that maximizes the sum of individual utilities minus the sum of individual contributions.

The Vickrey-Clarke-Groves mechanism is a mechanism for allocating public goods based on individual contributions. In a Vickrey-Clarke-Groves mechanism, individuals are asked to reveal their preferences for different levels of the public good and then they are asked to make a contribution to the provision of the public good. The public good is then provided at the level that maximizes the sum of individual utilities minus the sum of individual contributions.

There are a number of challenges associated with using experimental economics to study public goods, including the difficulty of creating a controlled environment in which individuals can make decisions about public goods, the difficulty of measuring individual preferences for public goods, and the difficulty of inducing individuals to contribute to the provision of public goods.

Experimental economics is a valuable tool for studying public goods because it allows researchers to control for confounding factors that may be present in field studies, it allows researchers to observe individual behavior in a controlled environment, and it allows researchers to test different mechanisms for allocating public goods.

Experimental economics studies of public goods have provided a number of important insights, including the finding that individuals tend to undercontribute to the provision of public goods, that individuals are more likely to contribute to the provision of public goods when they are informed about the benefits of the public good, and that individuals are more likely to contribute to the provision of public goods when they are given the opportunity to communicate with each other.

The insights from experimental economics studies of public goods can be used to improve public policy by designing policies that encourage individuals to contribute to the provision of public goods, by designing policies that inform individuals about the benefits of public goods, and by designing policies that give individuals the opportunity to communicate with each other about public goods.

There are a number of promising areas for future research in experimental economics studies of public goods, including the study of public goods in developing countries, the study of public goods in online environments, and the study of the role of social norms in public goods provision.