Cooperation versus Free Riding in a Threshold Public Goods Classroom Experiment

Abstract: The authors present a classroom public goods experiment on the basis of a provision-point mechanism (PPM), where subjects must make an all or nothing decision about providing the public good. As a teaching tool, this design is superior to traditional prisoner's dilemma games because it creates multiple equilibrium in which individual financial incentive to contribute less may result in a coordination failure. Because the PPM does not incorporate a dominant strategy to free ride, students must individually choose a level of cooperation without the benefits of communication. Students discover problems of achieving an optimal social outcome because failure to coordinate on an efficient equilibrium can eliminate benefits to the group. This experiment is an excellent vehicle for introducing game theoretic problems of public good provision and for engendering meaningful discussion of real-world applications.