A democratic society is considered where the voters, but not the politicians, are uncertain about how the economy works. The parties therefore have a strategic motive to misinform the voters. Will the voters learn how the economy works and will the policy decisions be efficient? It turns out...

The ability of groups to implement efficiency-enhancing institutions is emerging as a central theme of research in economics. This paper explores voting on a scheme of intergroup competition which facilitates cooperation in a social dilemma situation. Experimental results show that the...

We explore the political acceptance of taxation in commodity markets. Participants in our experiment earn incomes by trading and must collectively choose one of two tax regimes to raise a given tax revenue. A "uniform tax" (UT) imposes the same tax rate on all markets and is fair in that it...

The burgeoning literature on the use of sanctions to support public goods provision 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 both of resolving and of...

Introducing a threshold in the sense of a minimal project size transforms a public goods game with an inefficient equilibrium into a coordination game with a set of Pareto-superior equilibria. Thresholds may therefore improve efficiency in the voluntary provision of public goods. In our one-shot...

An economy with two dates is considered, one state at the first date and a finite number of states at the last date. Shareholders determine production plans by voting — one share, one vote — and at ?-majority stable stock market equilibria, alternative production plans are supported by at...

Tax incentives can be more or less salient, i.e. noticeable or cognitively easy to process. Our hypothesis is that taxes on consumers are more salient to consumers than equivalent taxes on sellers because consumers underestimate the extent of tax shifting in the market. We show that tax salience...

Entrusting the power to punish to a central authority is a hallmark of civilization. We study a collective action dilemma in which self-interest should produce a sub-optimal outcome absent sanctions for non-cooperation. We then test experimentally whether subjects make the theoretically optimal...