This paper investigates fund-raising mechanisms based on a prize as a way to overcome free riding in the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally the performance of a lottery, an all-pay auction and a benchmark voluntary contribution mechanism. We find that prize-based mechanisms perform better than voluntary contribution in terms of public good provision after accounting for the cost of the prize. Comparing the prize-based mechanisms, total contributions are significantly higher in the lottery than in the all-pay auction. Focusing on individual income types, the lottery outperforms voluntary contributions and the all-pay auction throughout the income distribution.

Faravelli, M., Stanca, L., & Corazzini, L. (2007). A Prize to Give for: An Experiment on Public Good Funding Mechanisms [Working paper del dipartimento].

A Prize to Give for: An Experiment on Public Good Funding Mechanisms

FARAVELLI, MARCO;STANCA, LUCA MATTEO;
2007

Abstract

This paper investigates fund-raising mechanisms based on a prize as a way to overcome free riding in the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally the performance of a lottery, an all-pay auction and a benchmark voluntary contribution mechanism. We find that prize-based mechanisms perform better than voluntary contribution in terms of public good provision after accounting for the cost of the prize. Comparing the prize-based mechanisms, total contributions are significantly higher in the lottery than in the all-pay auction. Focusing on individual income types, the lottery outperforms voluntary contributions and the all-pay auction throughout the income distribution.
Working paper del dipartimento
Scientifica
Auctions; Lotteries; Public Goods; Laboratory Experiments
English
Faravelli, M., Stanca, L., & Corazzini, L. (2007). A Prize to Give for: An Experiment on Public Good Funding Mechanisms [Working paper del dipartimento].
Faravelli, M; Stanca, L; Corazzini, L
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/23136
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