Testing a Coordination Process for Shared Goods: The Possibility of Successful Collective Action

Abstract

"This paper reports the design and testing of a coordination process for finding a group agreement simultaneously about cost sharing and the nature of a shared good. The process was designed to search for a cost sharing equilibrium, a particular type of Pareto optimum. The cost share equilibrium is a generalization of a Lindahl equilibrium in that it uses personalized prices to determine cost shares. The experiment tested a two-stage game: a proposal phase based on a coordination algorithm; and a voting stage to find a unanimous agreement. No demand revelation incentives were used, but unanimity voting seemed to inhibit free-riding. Outcomes close to Pareto optimal were obtained in three rounds, even with some misrepresentation of demands. Examination of individual behavior reveals that strategic behavior is affected by institutional rules, information, and group interactions."