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Enhancing fundraising with refund bonuses

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  • Cason, Timothy N.
  • Zubrickas, Robertas

Abstract

The provision point mechanism as a method of funding threshold public goods is extended with refund bonuses. Each contributor not only has his contribution refunded in the case of insufficient contributions but also receives a refund bonus proportional to his proposed contribution. As long as the refund bonus pool does not exceed the net value of the public good, in equilibrium the public good is always provided and refund bonuses are never distributed. In this paper, we empirically investigate this extension of the provision point mechanism in a laboratory experiment by testing its properties on allocative and distributive efficiency, equilibrium coordination, and invariance to information distribution. Individuals respond to the incentives induced by refund bonuses as predicted, but systematic deviations exist that are consistent with quantal response equilibrium. Since this simple mechanism has considerable practical potential especially in crowdfunding, these promising initial results call for further experimental work.

Suggested Citation

  • Cason, Timothy N. & Zubrickas, Robertas, 2017. "Enhancing fundraising with refund bonuses," Games and Economic Behavior, Elsevier, vol. 101(C), pages 218-233.
    • Handle: RePEc:eee:gamebe:v:101:y:2017:i:c:p:218-233
    DOI: 10.1016/j.geb.2015.11.001
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    Cited by:

    1. Cason, Timothy N. & Tabarrok, Alex & Zubrickas, Robertas, 2021. "Early refund bonuses increase successful crowdfunding," Games and Economic Behavior, Elsevier, vol. 129(C), pages 78-95.
    2. Lattimer, Timothy R.B. & Zubrickas, Robertas, 2023. "Refund bonuses and revenue equivalence," Economics Letters, Elsevier, vol. 231(C).
    3. Christopher Oconnor & Li Zhang & Cary Deck, 2022. "An examination of the effect of inequality on lotteries for funding public goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(4), pages 733-755, August.
    4. Li, Zhi & Liu, Pengfei & Swallow, Stephen K., 2017. "Supporting Private Provision of Ecosystem Services through Contracts: Evidence from Lab and Field Experiments," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266300, Agricultural and Applied Economics Association.
    5. Maja Adena & Steffen Huck, 2022. "Voluntary ‘donations’ versus reward-oriented ‘contributions’: two experiments on framing in funding mechanisms," Experimental Economics, Springer;Economic Science Association, vol. 25(5), pages 1399-1417, November.
    6. Zhi Li & Dongsheng Chen & Pengfei Liu, 2023. "Assurance payments on the coordination of threshold public goods provision: An experimental investigation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 407-436, April.
    7. Zhi Li & Pengfei Liu & Stephen K. Swallow, 2021. "Assurance Contracts to Support Multi-Unit Threshold Public Goods in Environmental Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(2), pages 339-378, October.
    8. Chan, Nathan W. & Wolk, Leonard, 2020. "Cost-effective giving with multiple public goods," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 130-145.
    9. An, Yonghong & Hu, Yingyao & Liu, Pengfei, 2018. "Estimating heterogeneous contributing strategies in threshold public goods provision: A structural analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 152(C), pages 124-146.
    10. Robertas Zubrickas, 2020. "Contingent wage subsidy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(4), pages 1105-1119, August.
    11. Federica Alberti & Anna Cartwright & Edward Cartwright, 2021. "Predicting Efficiency in Threshold Public Good Games: A Learning Direction Theory Approach," Working Papers in Economics & Finance 2021-01, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    12. Cason, Timothy N. & Zubrickas, Robertas, 2019. "Donation-based crowdfunding with refund bonuses," European Economic Review, Elsevier, vol. 119(C), pages 452-471.

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    More about this item

    Keywords

    Public goods; Provision point mechanism; Refund bonus; Crowdfunding;
    All these keywords.

    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
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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