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Rebate rules in threshold public good provision

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Author Info
Spencer, Michael A.
Swallow, Stephen K.
Shogren, Jason F.
List, John A.

Additional information is available for the following registered author(s):

Abstract

This paper considers how six alternative rebate rules affect voluntary contributions in a threshold public-good experiment. The rules differ by (1) whether an individual can receive a proportional rebate of excess contributions, a winner-takes-all of any excess contributions, or a full rebate of one's contribution in the event the public good is provided and excess contributions exist, and (2) whether the probability of receiving a rebate is proportional to an individual's contribution relative to total contributions or is a simple uniform probability distribution set by the number of contributors. The paper adds to the existing experimental economics literature on threshold public goods by investigating both aggregate and individual demand revelation under the winner-take-all and random full-rebate rules. Half of the rules (proportional rebate, winner-take-all with uniform probability among all group members, and random full-rebate with uniform probability) provide total contributions that nearly equal total benefits, while the rest (winner-take-all with proportional probability, winner-take-all with uniform probability among contributors only, and random full-rebate with proportional probability) exceed benefits by over 30%. Only the proportional rebate rule is found to achieve both aggregate and individual demand revelation. Our experimental results have implications for both fundraisers and valuation practitioners.

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File URL: http://www.sciencedirect.com/science/article/B6V76-4VM9K7K-1/2/679166a55f127e419d0784510030b67e
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Publisher Info
Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 5-6 (June)
Pages: 798-806
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:eee:pubeco:v:93:y:2009:i:5-6:p:798-806

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Web page: http://www.elsevier.com/locate/inca/505578

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Related research
Keywords: Experiment Lottery Provision point Public good Rebate;

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References listed on IDEAS
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  1. Marks, Melanie & Croson, Rachel, 1998. "Alternative rebate rules in the provision of a threshold public good: An experimental investigation," Journal of Public Economics, Elsevier, vol. 67(2), pages 195-220, February. [Downloadable!] (restricted)
  2. Rose, Steven K. & Clark, Jeremy & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D., 2002. "The private provision of public goods: tests of a provision point mechanism for funding green power programs," Resource and Energy Economics, Elsevier, vol. 24(1-2), pages 131-155, February. [Downloadable!] (restricted)
  3. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, vol. 42(4), pages 1009-1055, December. [Downloadable!] (restricted)
  4. Joseph Golec & Maurry Tamarkin, 1998. "Bettors Love Skewness, Not Risk, at the Horse Track," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 205-225, February. [Downloadable!] (restricted)
  5. Rondeau, Daniel & Poe, Gregory L. & Schulze, William D., 2005. "VCM or PPM? A comparison of the performance of two voluntary public goods mechanisms," Journal of Public Economics, Elsevier, vol. 89(8), pages 1581-1592, August. [Downloadable!] (restricted)
  6. Garrett, Thomas A. & Sobel, Russell S., 1999. "Gamblers favor skewness, not risk: Further evidence from United States' lottery games," Economics Letters, Elsevier, vol. 63(1), pages 85-90, April. [Downloadable!] (restricted)
  7. Andreas Lange & John A. List & Michael K. Price, 2007. "Using Lotteries To Finance Public Goods: Theory And Experimental Evidence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 901-927, 08. [Downloadable!] (restricted)
  8. McBride, Michael, 2006. "Discrete public goods under threshold uncertainty," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1181-1199, August. [Downloadable!] (restricted)
  9. Gregory Poe & Jeremy Clark & Daniel Rondeau & William Schulze, 2002. "Provision Point Mechanisms and Field Validity Tests of Contingent Valuation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(1), pages 105-131, September. [Downloadable!] (restricted)
  10. Craig E. Landry & Andreas Lange & John A. List & Michael K. Price & Nicholas G. Rupp, 2006. "Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 747-782, May. [Downloadable!] (restricted)
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  11. Morgan, John & Sefton, Martin, 2000. "Funding Public Goods with Lotteries: Experimental Evidence," Review of Economic Studies, Blackwell Publishing, vol. 67(4), pages 785-810, October.
  12. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July. [Downloadable!] (restricted)
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  14. Rondeau, Daniel & D. Schulze, William & Poe, Gregory L., 1999. "Voluntary revelation of the demand for public goods using a provision point mechanism," Journal of Public Economics, Elsevier, vol. 72(3), pages 455-470, June. [Downloadable!] (restricted)
    Other versions:
  15. Cadsby, Charles Bram & Maynes, Elizabeth, 1999. "Voluntary provision of threshold public goods with continuous contributions: experimental evidence," Journal of Public Economics, Elsevier, vol. 71(1), pages 53-73, January. [Downloadable!] (restricted)
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  18. Bohara, Alok K. & McKee, Michael & Berrens, Robert P. & Jenkins-Smith, Hank & Silva, Carol L. & Brookshire, David S., 1998. "Effects of Total Cost and Group-Size Information on Willingness to Pay Responses: Open Ended vs. Dichotomous Choice," Journal of Environmental Economics and Management, Elsevier, vol. 35(2), pages 142-163, March. [Downloadable!] (restricted)
  19. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  20. Smith, Vernon L, 1980. "Experiments with a Decentralized Mechanism for Public Good Decisions," American Economic Review, American Economic Association, vol. 70(4), pages 584-99, September. [Downloadable!] (restricted)
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