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

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Author Info
Luca Corazzini
Marco Faravelli
Luca Stanca

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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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Publisher Info
Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0714.

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Date of creation: Dec 2007
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Handle: RePEc:san:crieff:0714

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Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
Phone: 01334 462420
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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

This paper has been announced in the following NEP Reports:

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!]
    Other versions:
  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!]
    Other versions:
  3. 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:
  4. 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.
  5. Saijo, Tatsuyoshi, 2008. "Spiteful Behavior in Voluntary Contribution Mechanism Experiments," Handbook of Experimental Economics Results, Elsevier. [Downloadable!] (restricted)
  6. 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.
  7. 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.
  8. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June. [Downloadable!] (restricted)
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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. Henrik Orzen, 2008. "Fundraising through Competition: Evidence from the Lab," Discussion Papers 2008-11, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
    Other versions:
  2. 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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