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The Important Thing is not (Always) Winning but Taking Part: Funding Public Goods with Contests

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Abstract

This paper considers a public good game with heterogeneous endowments and incomplete information affected by extreme free-riding. We overcome this problem through the implementation of a contest in which several prizes may be awarded. We identify a monotone equilibrium, in which the contribution is strictly increasing in the endowment. We prove that it is optimal for the social planner to set the last prize equal to zero, but otherwise total expected contribution is invariant to the prize structure. Finally, we show that private provision via a contest Pareto-dominates public provision and is higher than the total contribution raised through a lottery.

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  • Marco Faravelli, 2007. "The Important Thing is not (Always) Winning but Taking Part: Funding Public Goods with Contests," Edinburgh School of Economics Discussion Paper Series 156, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:156
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    Cited by:

    1. Martin Kolmar & Andreas Wagener, 2012. "Contests and the Private Production of Public Goods," Southern Economic Journal, John Wiley & Sons, vol. 79(1), pages 161-179, July.
    2. Sander Onderstal & Arthur J.C. Schram & Adriaan R. Soetevent, 2011. "Bidding to give in the Field: Door-to-Door Fundraisers had it right from the Start," Tinbergen Institute Discussion Papers 11-070/1, Tinbergen Institute, revised 10 Nov 2011.
    3. Gregor, Martin, 2012. "Contest for power in organizations," Economics Letters, Elsevier, vol. 114(3), pages 280-283.
    4. Onderstal, Sander & Schram, Arthur J.H.C. & Soetevent, Adriaan R., 2014. "Reprint of: Bidding to give in the field," Journal of Public Economics, Elsevier, vol. 114(C), pages 87-100.
    5. Jörg Franke & Wolfgang Leininger, 2013. "On the Efficient Provision of Public Goods by Means of Lotteries," Ruhr Economic Papers 0399, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. Luca Corazzini & Marco Faravelli & Luca Stanca, 2010. "A Prize To Give For: An Experiment on Public Good Funding Mechanisms," Economic Journal, Royal Economic Society, vol. 120(547), pages 944-967, September.
    7. Jörg Franke & Wolfgang Leininger, 2013. "On the Efficient Provision of Public Goods by Means of Lotteries," CESifo Working Paper Series 4109, CESifo.
    8. 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.
    9. Faravelli, Marco & Stanca, Luca, 2012. "Single versus multiple-prize all-pay auctions to finance public goods: An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 677-688.
    10. repec:zbw:rwirep:0399 is not listed on IDEAS
    11. Fujiwara, Hikojiro & 藤原, 彦次郎 & Arai, Kazuhiro & 荒井, 一博, 2008. "Group Competition and Personality in an Experimental Public Goods Game," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 49(2), pages 149-161, December.
    12. 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.
    13. Marco Faravelli & Luca Stanca, 2007. "Single versus Multiple Prize Contests to Finance Public Goods: Theory and Experimental Evidence," Working Papers 127, University of Milano-Bicocca, Department of Economics, revised Nov 2007.
    14. 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.
    15. Onderstal, Sander & Schram, Arthur J.H.C. & Soetevent, Adriaan R., 2013. "Bidding to give in the field," Journal of Public Economics, Elsevier, vol. 105(C), pages 72-85.

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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