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Using lotteries to finance public goods: theory and experimental evidence

  • Andreas Lange
  • John List
  • Michael Price

This study explores the economics of charitable fund-raising. We begin by developing theory that examines the optimal lottery design while explicitly relaxing both risk-neutrality and preference homogeneity assumptions. We test our theory using a battery of experimental treatments and find that our theoretical predictions are largely confirmed. Specifically, we find that single and multiple prize lotteries dominate the voluntary contribution mechanism both in total dollars raised and the number of contributors attracted. Moreover, we find that the optimal fund-raising mechanism depends critically on the risk postures of potential contributors and preference heterogeneity.

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Paper provided by The Field Experiments Website in its series Artefactual Field Experiments with number 00381.

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Date of creation: 2007
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Handle: RePEc:feb:artefa:00381
Contact details of provider: Web page: http://www.fieldexperiments.com

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