The public goods game is a standard of experimental economics. In the basic game, subjects secretly choose how many of their private tokens to put into a public pot. The payoff of each player is her "private consumption" (her endowment minus her contribution) plus her benefit from the "public good" (the sum of contributions multiplied by a factor). The game is used to study degree of altruism and cooperation between individuals.

Public goods games are fundamental in experimental economics. The nature of the experiment is incentives and the problem of free riding. Public goods games investigate the incentives of individuals who free-ride off individuals who are contributing to the common pool.

A public goods game investigates behavioural economics and the actions of the players in the game. In this process, it seeks to use behavioural economics to understand the decisions of its players. It extends further to free-riding, which has far-reaching applications to environmental, managerial and social economics. Public goods games are valuable in understanding the role of incentives in an individual's behaviours. They arise from behavioural economics and have broad applications to societal challenges. Examples of applications include environmental policy, legal and justice issues and workplace and organisational structures.

Consider a group of individuals consists of n identical individuals. Each individual is endowed with M tokens and must decide how much tokens to allocate to a public "pot" (public good).

The payoff of each individual i is

${\displaystyle \pi _{i}=M-g_{i}+a\sum _{j=1}^{n}g_{j}}$

where ${\displaystyle g_{i}}$ is the contribution of individual i to the public good, and therefore, ${\displaystyle M-g_{i}}$ is her private consumption and ${\displaystyle a\sum _{j=1}^{n}g_{j}}$ is her benefit from the public good.

To find the optimal contribution we shall maximize the payoff of the representative individual: