We propose a new approach to the normative analysis of public-good provision. In addition to individual incentive compatibility, we impose conditions of robust implementability and coalition proofness. Under these additional conditions, participants' contributions can only depend on the level of...

Laboratory experiments by Fudenberg and Pathak (2010), and Vyrastekova, Funaki and Takeuch (2008) show that punishment is able to sustain cooperation in groups even when it is observed only in the end of the interaction sequence. Our results demonstrate that the real power of unobserved...

Customary law has been criticized from very different angles. Rational choice theorists claim that what looks like custom is nothing but self-interest. Positivists doubt that anything beyond consent assumes the force of law. In this paper, we adopt an experimental approach to test these claims....

Evidence from an experiment investigating the “house money effect” in the context of a public goods game is reconsidered. Analysis is performed within the framework of the panel hurdle model, in which subjects are assumed to be one of two types: free-riders, and potential contributors. The...

Punishees regularly ask for justification. But is justification also effective? To answer this question under controlled conditions, we have conducted a public goods experiment with central punishment. The authority is neutral – she does not benefit from contributions to the public good....

Games with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive beliefs, symmetric beliefs or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes...

This paper deals with second-best pollution taxation by investigating allocations instead of the corresponding tax rates. Assuming certain restrictions on utility and that the marginal revenue from environmental taxation is positive, it is shown that environmental quality is higher in second...

Cartels are inherently instable. Each cartelist is best off if it breaks the cartel, while the remain-ing firms remain loyal. If firms interact only once, if products are homogenous, if firms compete in price, and if marginal cost is constant, theory even predicts that strategic interaction...

The most famous element in Bentham’s theory of punishment, the Panopticon Prison, expresses his view of the two purposes of punishment, deterrence and special prevention. We investigate Bentham’s intuition in a public goods lab experiment by manipulating how much information on punishment...

This paper derives a version of the Samuelson rule, which takes not only the marginal costs of public funds into account but also the desirability of preference revelation. Under a linear income tax more able individuals suffer from a larger utility loss if taxes are raised to cover the cost of...