On the Provision of Public Goods with Probabilistic and Ambiguous Thresholds

Many natural systems involve thresholds that, once triggered, imply irreversible damages for the users. Although the existence of such thresholds is undisputed, their location is highly uncertain. We explore experimentally how threshold uncertainty affects collective action in a series of threshold public goods games. Whereas the public good is always provided when the exact value of the threshold is known, threshold uncertainty is generally detrimental for the public good provision as contributions become more erratic. The negative effect of threshold uncertainty is particularly severe when it takes the form of ambiguity, i.e. when players are not only unaware of the value of the threshold, but also of its probability distribution. Early and credible commitment helps groups to cope with uncertainty.

Dannenberg, Astrid, Andreas Löschel, Gabriele Paolacci, Christiane Reif and Alessandro Tavoni (2015), On the Provision of Public Goods with Probabilistic and Ambiguous Thresholds, Environmental and Resource Economics 61(3) , 365-383