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Economic Category: Public Goods

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Public Goods - Article

1. Labor Unions in the United States

This article explores the nature and development of labor unions in the United States. It reviews the growth and recent decline of the American labor movement and makes comparisons with the experience of foreign labor unions to clarify particular aspects of the history of labor unions in the United States. [Details...]

2. Negative Externalities

Article explaining the basics of negative production and consumption externalities. [Details...]

3. Pollution Controls

This article explains the regulatory standards of pollution controls, the cost of pollution controls, the economic effects of pollution controls, and market-based approach to pollution control. [Details...]

4. Turnpikes and Toll Roads in Nineteenth-Century America

This article describes how turnpikes demonstrated how nineteenth-century Americans integrate elements of modern corporation-with its emphasis on profit-taking residual claimants- with non-pecuniary motivations such as use and esteem. [Details...]

Public Goods - Experiment Software

5. Entry/Congestion Game

This program sets up a multi-person game in which each person chooses whether or not to enter a market or other activity that can become congested by excess entry. The payoff for all people who enter is a decreasing function of the number of entrants, and the payoff for not entering is a constant. The incentives are typically such that each person would prefer to enter if the others are unlikely to do so, and would prefer to stay out if the others are likely to enter. If the number of participants is large, the equilibrium will be characterized by equal expected payoffs for entry and non-entry. Following a suggestion made by David Reiley, congestion effects can be controlled by imposing an entry fee that forces entrants to pay the external costs imposed on others. The entry fee or toll is set by the experimenter. Another setup option determines whether or not people can see the number of those in their group who have already entered at any given time, i.e. whether they can obtain a "traffic report." [Details...]

6. Provision-Point Public Goods Game

This program sets up an experiment in which each person is given an endowment of tokens that may either be kept or contributed to a public good. Each token has a specified value if kept, but the value if invested depends on others' contributions. [Details...]

7. Public Goods (Voluntary Contributions) Game

This program sets up an experiment in which each person is given an endowment of tokens that may either be kept or contributed to a public good. The value of a token kept is typically specified to be greater than the "internal return" that the individual receives from making the contribution, so there is a private incentive not to contribute, the strength of which depends on the size of the internal return. [Details...]

8. Rent Seeking Lobbying Game

This program sets up a multi-person game in which each person chooses a lobbying "effort" that represents real resources used in an attempt to obtain a prize (e.g. a broadcasting license). [Details...]

9. Volunteer's Dilemma Game

This program sets up a multi-person game in which each person chooses whether or not to "volunteer." The payoff for all people in a group is higher if at least one of them volunteers, but a volunteer incurs a cost that cannot be shared. The incentives are such that each person would prefer to volunteer only if it is likely that nobody else will do so. You may specify the cost of volunteering and the individual payoffs when there is at least one volunteer and when there is no volunteer. You also specify the group size and the number of rounds. Groupings may be fixed (same in all periods) or randomly reconfigured after each round. There may be two treatments with differing parameters; but a one-treatment setup is obtained by setting the number of rounds in treatment 2 to be zero. [Details...]

Public Goods - Web Site

10. Enterprise Restructuring in the former Soviet Union

Citizens of the countries of the former Soviet Union (FSU) have recognized the potential benefits, observed in many different cultures and societies around the world, of private, market-driven enterprises. For more than half a century enterprises in the FSU have been subject to comprehensive state ownership and central planning. Prices and financing were typically of little concern to enterprise management, while workers did not have to worry about job security and received a wide range of social benefits through enterprises. While moving toward private, market-driven enterprises offers great promise for an improved standard of living for the average person, such a transition represents a fundamental social, psychological, and economic challenge. [Details...]

Public Goods - Non-computerized experiment

11. An EPA-Style Auction of Pollution Permits

This exercise simulates a Chicago Board of Trade auction of allowances to emit sulfur dioxide, one of the pollutants which causes acid rain. The CBOT began running these auctions in March of 1993 on behalf of the Environmental Protection Agency. The EPA uses the auctions as part of a market-based program to cut power company emissions of sulfur dioxide in half between the years 1990 and 2000. This simulation demonstrates the cost savings from using the market-based approach versus requiring an across- the-board cut in emissions. [Details...]

12. How Fairness Can Affect Voluntary Contributions to Public Goods

Contributions to public goods have been studied experimentally by economists and sociologists for a long time. The main result is that subjects free ride, but not as much as game theory predicts. The standard game is as follows. Each member of a group of n players receives an endowment zi. Each player has to choose how much to invest in a public good. The experimenter collects the contributions, multiplies the total by some amount (a) and divides equally the product among the players. The game-theoretic prediction is that no one contributes as long as a/n<1. Experimental results showed that this prediction is not verified: subjects contribute around 40% of their endowments (see Ledyard, 1995, for a survey). The main studies focused on the rate of return of the public good, the number of players, the introduction of thresholds, institutional rules, etc. Some of them also examined subjects' preferences: comparative studies have been done on gender or education (for instance, Brown-Kruse and Hummels, 1992). In this paper, we propose to test the influence of fairness on subjects' decisions. Previous studies used questionnaires to discriminate among participants those who have stronger senses of fairness. Here, we study it directly in games with unfair redistribution, i.e., with payoffs and endowments heterogeneity. Our experiment, easy to reproduce in the classroom, shows that contribution rates differ largely and proves that fairness play a role in subjects' decisions to contribute. [Details...]

13. Pollution Rights Trading Game

A classroom game can be played to demonstrate to students the natural incentives companies have to compare costs of pollution reduction to the cost of obtaining the right to pollute. The appeal is that students often have trouble accepting the concept of an optimal pollution level and have no trouble arriving at one through market forces. [Details...]

14. Selfish Economists? A Means of Generating Classroom Involvement

Over the past several years, two points made by authors in Classroom Expernomics have changed the way I teach my Intermediate Microeconomic Theory students about the free-rider paradox. First, Hoaas and Drouillard [1994, p. 6] warned that participation in a public goods experiment was not sufficient to understand the paradox, and advised "post-experiment explanation." Second, Stodder [1994, pp. 1-2] persuasively argued that in many classrooms the voluntary contributions motive is "denigrated," either intentionally or without thought. In response to the first point, I employ a straightforward all-or-nothing voluntary contributions game. The length of the game is significantly shorter than the more common tokens-distribution game--leaving more time afterwards for immediate classroom dialogue. Further, the characteristics of the game are easily explained. In response to the second point, I summarize the students' contribution rates in chart form and use the recent articles in the Winter 1996 issue of the Journal of Economic Perspectives as a springboard for discussion of the implications of and motivations behind their own and others' choices. [Details...]

15. Teaching Privatization in the Soviet Union: An Experimental Economics Approach

During the spring 1991 semester I developed a discovery approach, or experimental economics approach, to an issue of restructuring the Soviet economy. It was innovative because students discovered the advantages of stock markets and how properly designed incentives encourage better work. This was done in the context of a proposal being considered in the USSR to reform the Soviet economy. [Details...]

16. Voluntary Provision of a Public Good

This paper describes a simple public goods game, implemented with playing cards in a classroom setup. Students choose whether to contribute to the provision of a public good in a situation where it is privately optimal not to contribute, but socially optimal to contribute fully. This exercise motivates discussion of altruism, strategies for private fund-raising, and the role of the government in resolving the public goods problem. [Details...]

Public Goods - Course lecture

17. Analyzing Public Sector Economic Activity

Discussion on the demand for public goods, externalities, the Coase theorem, and democracy and economic effeciency. [Details...]

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