Abstract:
In this paper, we present an agreement mechanism that uses the notion of conditional commitment to reach stable and efficient outcomes in the voluntary contributions mechanism. Theoretically, we show that the use of our conditional commitment mechanism can yield a strong equilibrium at efficient levels so that no agent or a coalition of agents may want to deviate from the corresponding strategy profile. Using data from a public good game experiment, we show that agents can reach the pareto efficient strong equilibrium using conditional commitments. Most agents in the experiment choose to use conditional commitments and in some periods more than 80% of the groups reach agreements that lead them to the efficient outcome although no agent has the opportunity to communicate. We also notice that different commitment levels specified in the mechanism can change the agents’ decisions and the usage frequency of the mechanism.
