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

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  • Marco Faravelli

    (Department of Economics, University of Milan-Bicocca and Edinburgh School of Economics)

Abstract

This paper considers a public good game with incomplete information a?ected by extreme free-riding. We overcome this problem through the implementation of a contest in which several prizes can be awarded. For any possible distribution of wealth we identify the necessary and su?cient conditions for the equilibrium allocations to be interior for all players. At interior solutions, it is optimal for the social planner to set the last prize equal to zero, but otherwise the total expected welfare is independent of the distribution of the total prize sum among the prizes. We prove that private provision via a contest Pareto-dominates both public provision and private provision via a lottery.

Suggested Citation

  • Marco Faravelli, 2006. "The Important Thing Is not (Always) Winning but Taking Part: Funding Public Goods with Contests," Working Papers 102, University of Milano-Bicocca, Department of Economics, revised Nov 2006.
    • Handle: RePEc:mib:wpaper:102
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    References listed on IDEAS

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    Citations

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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. 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.
    5. repec:zbw:rwirep:0399 is not listed on IDEAS
    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. 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.
    8. 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.
    9. 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.
    10. Franke, Jörg & Leininger, Wolfgang, 2013. "On the Efficient Provision of Public Goods by Means of Lotteries," Ruhr Economic Papers 399, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    11. Natalie Struwe & Esther Blanco & James M. Walker, 2024. "Competition among public good providers for donor rewards," Experimental Economics, Springer;Economic Science Association, vol. 27(1), pages 215-243, March.
    12. 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.
    13. 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.
    14. 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.
    15. 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.
    16. 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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