Cross-border banking needs cross-border recapitalisation mechanisms. Each mechanism, however, suffers from the financial trilemma, which is that cross-border banking, national financial autonomy and financial stability are incompatible. In this paper, we study the efficiency of different...

Experimental studies have shown that sanctions effectively deter free riding within groups. However, the over-use of costly punishment may actually harm overall welfare. A main reason for over-punishment is that free-riders generate negative emotions that likely favor excessive punishments. In...

The purpose of this paper is to investigate the mutual compatibility of voluntary provision of public good and strategic behavior of consumers in the market for private goods. We study the existence of equilibrium private provision of a public good within general strategic equilibrium framework...

According to popular belief, frogs are boiled to death when the water is heated gradually. In this paper, we investigate how humans respond to a very slow versus a very steep increase of a subsidy on contributions to a public good. In an experiment, we vary the mode of the increase (gradual...

This note is an answer to a previous model on conformity in public goods contributions developed by Carpenter (2004), where a population evolution is allowed according to the standard replicator dynamic (Taylor and Jonker, 1978; Maynard Smith, 1982). To confirm his theoretical prediction, Carpenter...

In an economy with voluntarily provided public goods and private product varieties, and a general class of CES preferences, it is shown that aggregate public good contribution follows an inverted-U pattern with respect to group size when private and public goods are substitutable in preferences....

An OLG model is developed to study a “compulsory volunteer” policy mandating the young to volunteer. While the policy likely increases the social capital level, its long-run effect on the old depends crucially on the elasticity of a public good.

The burgeoning literature on the use of sanctions to support the provision of public goods has largely neglected the use of formal or centralized sanctions. We let subjects playing a linear public goods game vote on the parameters of a formal sanction scheme capable of either resolving or...

This Paper deals with collective decision making within a group of independent jurisdictions. The right to choose the public policy is delegated from the central authority of one of the jurisdictions through a bidding procedure among the group members. We identify the following trade-off:...

This Paper analyses an overlapping generation model of public good provision under repeated voting. The public good is financed through age-dependent taxation that distorts human capital investment. Taxes redistribute income both across different skill groups and across generations. We contrast...