Voluntary Partnerships For Equally Sharing Contribution Costs

Lorenzo Spadoni (Università di Cassino)
Irene Buso (Ca' Foscari)
Daniela Di Cagno (Luiss)
Werner Guth (Max–Planck-Institute for Research on Collective Goods)

Abstract

Contributors to public goods with commitment power decide, before voluntarily contributing,
whether and when to join the (sub)group whose partners equally share their
contribution cost. According to our theoretical analysis stable cost sharing partnerships
can solve the freeriding problem (partners fully contribute whereas possible outsiders
freeride). Our data show that neither partners always contribute maximally nor that
outsiders always freeride. Paradigmatic field examples of such cost sharing partnerships are trade unions where successful collective negotiations yield improvements not only to union members but to all employees since employers try to discourage joining the union by providing freeriding incentives to employees, or international treaties committing countries to provide some level of global public goods like environmental protection or global security are other important field applications.

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