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Voluntary Funding for Generic Advertising Using a Provision Point Mechanism: An Experimental Analysis of Option Assurance

  • Kent D. Messer
  • Harry M. Kaiser
  • Gregory L. Poe

The mandatory nature of check-off programs remains a contentious policy issue. A provision point mechanism with a money-back guarantee offers an attractive, alternative voluntary funding approach, yet faces the problem of how to maintain future administrative capacity should contributions fall short of the funding threshold in the present period. To address this concern, a novel two-threshold, provision point mechanism is tested that sets a high threshold to fund marketing and a low threshold, if necessary, to secure administrative capacity for future advertising. Experimental results demonstrate that providing such “option assurance” sustains high overall contributions and, in some settings, can increase producer surplus. Copyright 2007, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-9353.2007.00375.x
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Article provided by Agricultural and Applied Economics Association in its journal Review of Agricultural Economics.

Volume (Year): 29 (2007)
Issue (Month): 3 ()
Pages: 612-631

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Handle: RePEc:oup:revage:v:29:y:2007:i:3:p:612-631
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  1. 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.
  2. Messer, Kent D. & Schmit, Todd M. & Kaiser, Harry M., 2004. "Optimal Institutional Mechanisms for Funding Generic Advertising: An Experimental Analysis," Research Bulletins 122106, Cornell University, Department of Applied Economics and Management.
  3. Brookshire, David S & Coursey, Don L, 1987. "Measuring the Value of a Public Good: An Empirical Comparison of Elicitation Procedures," American Economic Review, American Economic Association, vol. 77(4), pages 554-66, September.
  4. Cadsby, Charles Bram & Maynes, Elizabeth, 1999. "Voluntary provision of threshold public goods with continuous contributions: experimental evidence," Journal of Public Economics, Elsevier, vol. 71(1), pages 53-73, January.
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  6. Rose, Steven K. & Clark, Jeremy & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D., 2002. "The private provision of public goods: tests of a provision point mechanism for funding green power programs," Resource and Energy Economics, Elsevier, vol. 24(1-2), pages 131-155, February.
  7. 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.
  8. Rapoport, Amnon & Eshed-Levy, Dalit, 1989. "Provision of step-level public goods: Effects of greed and fear of being gypped," Organizational Behavior and Human Decision Processes, Elsevier, vol. 44(3), pages 325-344, December.
  9. Messer, Kent D. & Kaiser, Harry M. & Schulze, William D., 2004. "Status Quo Bias and Voluntary Contributions: Can Lab Experiments Parallel Real World Outcomes for Generic Advertising?," Research Bulletins 122094, Cornell University, Department of Applied Economics and Management.
  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. Jason F. Shogren, 2004. "Incentive Mechanism Testbeds: Discussion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1218-1219.
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  13. Brubaker, Earl R, 1975. "Free Ride, Free Revelation, or Golden Rule?," Journal of Law and Economics, University of Chicago Press, vol. 18(1), pages 147-61, April.
  14. Marks, Melanie B & Croson, Rachel T A, 1999. " The Effect of Incomplete Information in a Threshold Public Goods Experiment," Public Choice, Springer, vol. 99(1-2), pages 103-18, April.
  15. Ferrero, Jennifer L. & Boon, Leen & Kaiser, Harry M. & Forker, Olan D., 1996. "Annotated Bibliography of Generic Commodity Promotion Research," Research Bulletins 122819, Cornell University, Department of Applied Economics and Management.
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