Institution Formation in Public Goods Games

@article{Kosfeld2006InstitutionFI,
  title={Institution Formation in Public Goods Games},
  author={M. Kosfeld and Akira Okada and A. Riedl},
  journal={IZA: General Labor Economics (Topic)},
  year={2006}
}
Centralized sanctioning institutions are of utmost importance for overcoming free-riding tendencies and enforcing outcomes that maximize group welfare in social dilemma situations. However, little is known about how such institutions come into existence. In this paper we investigate, both theoretically and experimentally, the endogenous formation of institutions in a public goods game. Our theoretical analysis shows that players may form sanctioning institutions in equilibrium, including those… Expand
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