This classroom exercise illustrates the Tiebout (1956) hypothesis that residential sorting across multiple jurisdictions leads to a more efficient allocation of local public goods. The exercise places students with heterogeneous preferences over a public good into a single classroom community. A simple voting mechanism determines the level of public good provision in the community. Next, the classroom is divided in two, and students may choose to move between the two smaller communities, sorting themselves according to their preferences for public goods. The exercise places cost on movement at first, then allows for costless sorting. Students have the opportunity to observe how social welfare rises through successive rounds of the exercise, as sorting becomes more complete. They may also observe how immobile individuals can become worse off because of incomplete sorting when the Tiebout assumptions do not hold perfectly.
Bibliographical noteFunding Information:
Keith Brouhle is an assistant professor of marketing, business economics and law at the University of Alberta. Jay Corrigan is an assistant professor of economics at Kenyon College (e-mail: corrigan@ kenyon.edu). Rachel Croson is an associate professor of operations and information management at the University of Pennsylvania. Martin Farnham is an assistant professor of economics at the University of Victoria. Luba Habodaszova is an instructor of economics at City University. Laurie Tipton Johnson is an assistant professor of economics at the University of Denver. Martin Johnson is an assistant professor of economics at the University of California, Riverside. Selhan Garip is a graduate student at Virginia Tech. David Reiley is an associate professor of economics at the University of Arizona. The authors appreciate comments from participants at the Southern Economic Association conference in New Orleans, from Lucie Schmidt, and three anonymous reviewers. The authors are grateful for the support of NSF Grant GA 10210.
- Classroom experiments
- Public goods
- Residential sorting
- Tiebout hypothesis