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Abstract

Many mechanisms have been designed to solve the free-rider problem in public good environments. The designers of those mechanisms focused on good static equilibrium properties. In the first essay, I propose a new mechanism for the provision of public goods that has good dynamic properties instead. The mechanism gives all agents the possibility to condition their contribution on the total level of contribution provided by all agents. Under a reasonable variant of Better Response Dynamics all equilibrium outcomes are Pareto efficient. This makes the mechanism particularly suited for repeated public good environments. In contrast to many previously suggested mechanisms, it does further not require an institution that has the power to enforce participation and/or transfer payments. Neither does it use any knowledge of agents preferences.

In the second essay the mechanism's performance is compared experimentally to the performance of the Voluntary Contribution Mechanism (VCM). In an environment with binary contribution and linear valuations subjects play the mechanisms in a repeated setting. The mechanisms are compared in one case of complete information and homogeneous valuations and in a second case with heterogeneous valuations and incomplete information. In both cases a significantly higher contribution rate can be observed when the Conditional Contribution Mechanism is used.

In the third essay we compare the Conditional Contribution Mechanism to the VCM in a non-binary contribution environment. Additionally we compare both mechanism to a theoretically flawed but simpler version of the Conditional Contribution Mechanism.