BDM Colloquium: Caleb Cox

 

Abstract: I study a model of binary excludable public goods with interdependent values. Under a simple threshold mechanism, provision of the excludable public good is good news about its value. Naïve agents who condition their expectations only on their private information will contribute too little, despite the absence of free-riding incentives. In a laboratory experiment, subjects indeed fail to account for this selection effect, leading to under-contribution relative to Bayesian Nash equilibrium. Using modified games with adverse selection or no selection effects, I show that subjects do not respond to selection effects at all, though the data do not match the point predictions of fully-cursed equilibrium.

 

Caleb Cox is the recipient of a small research grant from Ohio State's BDM Initiative.