This paper investigates single and multiple prize contests as incentive mechanisms for the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally a one-prize contest with a three-prize contest in a case where theory predicts that several prizes maximise revenues. We ¯nd that, contrary to the theoretical predictions, total contributions are signi¯cantly higher in the one-prize contest. In both treatments contribu- tions converge towards theoretical predictions over successive rounds, but the e®ects of repetition are di®erent: convergence is fast in the one-prize treatment, while gradual and with some undershooting in the three-prize treatment. Focusing on individual income types, the better performance of the single-prize contest is largely explained by the contributions of high- income individuals: a single larger prize provides a more e®ective incentive for richer individuals than three smaller prize

Stanca, L., & Faravelli, M. (2007). Single versus Multiple Prize Contests to Finance Public Goods: Theory and Experimental Evidence [Working paper del dipartimento].

Single versus Multiple Prize Contests to Finance Public Goods: Theory and Experimental Evidence

STANCA, LUCA MATTEO;FARAVELLI, MARCO
2007

Abstract

This paper investigates single and multiple prize contests as incentive mechanisms for the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally a one-prize contest with a three-prize contest in a case where theory predicts that several prizes maximise revenues. We ¯nd that, contrary to the theoretical predictions, total contributions are signi¯cantly higher in the one-prize contest. In both treatments contribu- tions converge towards theoretical predictions over successive rounds, but the e®ects of repetition are di®erent: convergence is fast in the one-prize treatment, while gradual and with some undershooting in the three-prize treatment. Focusing on individual income types, the better performance of the single-prize contest is largely explained by the contributions of high- income individuals: a single larger prize provides a more e®ective incentive for richer individuals than three smaller prize
Working paper del dipartimento
Scientifica
Auctions; Public Goods; Laboratory Experiments
English
Stanca, L., & Faravelli, M. (2007). Single versus Multiple Prize Contests to Finance Public Goods: Theory and Experimental Evidence [Working paper del dipartimento].
Stanca, L; Faravelli, M
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/23156
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