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A Prize to Give for: An Experiment on Public Good Funding Mechanisms

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Author Info
Luca Corazzini () (Department of Economics, University of Milan-Bicocca)
Marco Faravelli () (Department of Economics, University of Milan-Bicocca)
Luca Stanca () (Department of Economics, University of Milan-Bicocca)

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Abstract

This paper investigates fund-raising mechanisms based on a prize as a way to overcome free riding in the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally the performance of a lottery, an all-pay auction and a benchmark voluntary contribution mechanism. We find that prize-based mechanisms perform better than voluntary contribution in terms of public good provision after accounting for the cost of the prize. Comparing the prize-based mechanisms, total contributions are significantly higher in the lottery than in the all-pay auction. Focusing on individual income types, the lottery outperforms voluntary contributions and the all-pay auction throughout the income distribution.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper108.pdf
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File Function: First version, 2007
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Publisher Info
Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 108.

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Length: 29 pages
Date of creation: 2007
Date of revision: 2007
Handle: RePEc:mib:wpaper:108

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Related research
Keywords: Auctions Lotteries Public Goods Laboratory Experiments

Other versions of this item:

Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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References listed on IDEAS
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.:
  1. Kenneth S. Chan & Stuart Mestelman & R. Andrew Muller, 1998. "Voluntary Provision of Public Goods," McMaster Experimental Economics Laboratory Publications 1998-02, McMaster University. [Downloadable!]
  2. Henrik Orzen, 2005. "Fundraising through Competition: Evidence from the Lab," Discussion Papers 2005-04, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
  3. Bagnoli, Mark & McKee, Michael, 1991. "Voluntary Contribution Games: Efficient Private Provision of Public Goods," Economic Inquiry, Oxford University Press, vol. 29(2), pages 351-66, April.
  4. Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Oxford University Press, vol. 26(4), pages 585-608, October.
  5. Lisa R. Anderson & Jennifer M. Mellor & Jeffrey Milyo, 2004. "Inequality and Public Good Provision: An Experimental Analysis," Working Papers 12, Department of Economics, College of William and Mary. [Downloadable!]
    Other versions:
  6. 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.
  7. Jacob K. Goeree, Emiel Maasland, Sander Onderstal, and John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
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Cited by:
(explanations, 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.)

  1. Marco Faravelli, 2008. "The Important Thing Is not (Always) Winning but Taking Part: Funding Public Goods with Contests," CRIEFF Discussion Papers 0802, Centre for Research into Industry, Enterprise, Finance and the Firm. [Downloadable!]
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