Public Goods: Voluntary Contributions and Risk
AbstractWe analyze two incentive mechanisms as a way of financing public goods. Our mechanism can be interpreted as a variation of a parimutuel lottery in which the total rebate (prize) is made endogenous by setting it equal to a non-increasing function of total bets. The mechanism changes the nature of the standard VCM from a Prisoner’s Dilemma to a Stag-Hunt game. We tested —and found support for— the theoretical predictions of the model by means of a computer-based experiment. The theoretical model and the supporting experimental evidence both suggest the mechanism is an efficient and equitable means to finance public goods through voluntary contributions. In policy terms, and beyond the efficiency and equity considerations, the mechanism would be easy to implement and run given its simplicity and self-sufficiency.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2014-02.
Length: 55 pages
Date of creation: Mar 2014
Date of revision:
Publication status: Published by Ivie
Public Goods; Voluntary Contribution Mechanism; Subsidy Schemes; Laboratory Experiments;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-04-11 (All new papers)
- NEP-CBE-2014-04-11 (Cognitive & Behavioural Economics)
- NEP-EXP-2014-04-11 (Experimental Economics)
- NEP-GER-2014-04-11 (German Papers)
- NEP-GTH-2014-04-11 (Game Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Morgan, John & Sefton, Martin, 2000. "Funding Public Goods with Lotteries: Experimental Evidence," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 785-810, October.
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