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On the performance of rule-based contribution schemes under endowment heterogeneity

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  • Kesternich, Martin
  • Lange, Andreas
  • Sturm, Bodo

Abstract

We experimentally test different rule-based contribution mechanisms in a repeated 4-player public goods game with endowment heterogeneity and compare them to a VCM, distinguishing between a random- and an effort-based allocation of endowments. We find that endowment heterogeneities limit the efficiency gains from minimum contribution rules under random allocation. Under effort-based allocations, substantial efficiency gains relative to a VCM occur, though being largely driven by significant reductions of contributions in VCM. By apparently influencing the perception of fair burden sharing, the endowment allocation procedure crucially impacts voluntary contributions under VCM, while the rule-based mechanisms generate stable efficiency levels, even though endowment heterogeneity substantially limits the ability of rule-based mechanisms to achieve the potential efficiency gains.

Suggested Citation

  • Kesternich, Martin & Lange, Andreas & Sturm, Bodo, 2014. "On the performance of rule-based contribution schemes under endowment heterogeneity," ZEW Discussion Papers 14-055, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:14055
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    4. Bouma, J.A. & Nguyen, Binh & van der Heijden, Eline & Dijk, J.J., 2018. "Analysing Group Contract Design Using a Lab and a Lab-in-the-Field Threshold Public Good Experiment," Discussion Paper 2018-049, Tilburg University, Center for Economic Research.
    5. Rémi Suchon & Vincent Théroude, 2022. "Inequality and cooperation: meta-analytical evidence from Public Good Experiments," Working Papers of BETA 2022-29, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    6. Carlo Gallier & Martin Kesternich & Bodo Sturm, 2017. "Voting for Burden Sharing Rules in Public Goods Games," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 535-557, July.
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    8. Gill, David & Prowse, Victoria, 2019. "Measuring costly effort using the slider task," Journal of Behavioral and Experimental Finance, Elsevier, vol. 21(C), pages 1-9.
    9. Hofmann, Elisa & Kyriacou, Lucas & Schmidt, Klaus M., 2021. "A Model United Nations Experiment on Climate Negotiations," Rationality and Competition Discussion Paper Series 266, CRC TRR 190 Rationality and Competition.
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    More about this item

    Keywords

    public good; institutions; minimum contribution rules; cooperation; endowment heterogeneity;
    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
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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