CRIEFF Discussion Paper Number 0714
A
Prize to Give for: An Experiment on Public Good Funding Mechanisms
Luca Corazzini (University of East Anglia), Marco Faravelli (University of St. Andrews), Luca Stanca (University of Milan Bicocca)
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.
JEL Classifications:
C91, D44, H41
Keywords:
Auctions; Lotteries; Public Goods; Laboratory Experiments.
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