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Fundraising through Competition: Evidence from the Lab

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  • Henrik Orzen

    ()
    (University of Nottingham)

Abstract

This paper investigates fundraising mechanisms for the private provision of a public good which utilize competition as an incentive device for contributions. Theory predicts that “all-pay” competition is particularly effective for fundraising. Within this class of mechanisms different types of lotteries and all-pay auctions are analyzed and ranked. Three all-pay competition mechanisms are then examined in a laboratory experiment vis-à-vis a voluntary contribution mechanism (VCM). All three outperform the VCM and fully efficient outcomes are attained in the last-price all-pay auction after some learning has taken place.

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Bibliographic Info

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2005-04.

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Date of creation: Jan 2005
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Handle: RePEc:not:notcdx:2005-04

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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Web page: http://www.nottingham.ac.uk/economics/cedex/
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Keywords: Public Goods; Provision Mechanisms; Experiments; Contests;

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References

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  1. Marco Faravelli, 2006. "The Important Thing Is not (Always) Winning but Taking Part: Funding Public Goods with Contests," Working Papers 102, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
  2. Claudia Keser & Frans A.A.M. van Winden, 2000. "Conditional Cooperation and Voluntary Contributions to Public Goods," Tinbergen Institute Discussion Papers 00-011/1, Tinbergen Institute.
  3. Urs Fischbacher & Simon Gaechter & Ernst Fehr, . "Are People Conditionally Cooperative? Evidence from a Public Goods Experiment," IEW - Working Papers 016, Institute for Empirical Research in Economics - University of Zurich.
  4. Jacob K. Goeree & Emiel Maasland & Sander Onderstal & John L. Turner, 2005. "How (Not) to Raise Money," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 897-926, August.
  5. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
  6. 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.
  7. Jack Hirshleifer, 1983. "From weakest-link to best-shot: The voluntary provision of public goods," Public Choice, Springer, vol. 41(3), pages 371-386, January.
  8. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 10-93-9, Pennsylvania State - Department of Economics.
  9. Andreoni, James & Petrie, Ragan, 2004. "Public goods experiments without confidentiality: a glimpse into fund-raising," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1605-1623, July.
  10. Bagnoli, Mark & Lipman, Barton L, 1989. "Provision of Public Goods: Fully Implementing the Core through Private Contributions," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 583-601, October.
  11. Luca Corazzini & Marco Faravelli & Luca Stanca, 2007. "A Prize to Give for: An Experiment on Public Good Funding Mechanisms," Working Papers 108, University of Milano-Bicocca, Department of Economics, revised 2007.
  12. 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.
  13. Glenn W. Harrison & Jack Hirshleifer, 1988. "An Experimental Evaluation of Weakest-Link/Best Shot Models of Public Goods," UCLA Economics Working Papers 473, UCLA Department of Economics.
  14. Jeffrey Carpenter & Jessica Holmes & PeterHans Matthews, 2008. "Charity auctions: a field experiment," Economic Journal, Royal Economic Society, vol. 118(525), pages 92-113, 01.
  15. 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.
  16. Arthur J.H.C. Schram & Sander Onderstal, 2009. "Bidding To Give: An Experimental Comparison Of Auctions For Charity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 431-457, 05.
  17. Alston, Richard M. & Nowell, Clifford, 1996. "Implementing the voluntary contribution game: A field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 31(3), pages 357-368, December.
  18. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  19. Bagnoli, Mark & McKee, Michael, 1991. "Voluntary Contribution Games: Efficient Private Provision of Public Goods," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 351-66, April.
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