Working Paper: NBER ID: w14559
Authors: Michael A. Spencer; Stephen K. Swallow; Jason F. Shogren; John A. List
Abstract: This paper considers how six alternative rebate rules affect voluntary contributions in a threshold public-good experiment. The rules differ by (1) whether an individual can receive a proportional rebate of excess contributions, a winner-takes-all of any excess contributions, or a full rebate of one's contribution in the event the public good is provided and excess contributions exist, and (2) whether the probability of receiving a rebate is proportional to an individual's contribution relative to total contributions or is a simple uniform probability distribution set by the number of contributors. The paper adds to the existing experimental economics literature on threshold public goods by investigating both aggregate and individual demand revelation under the winner-take-all and random full-rebate rules. Half of the rules (proportional rebate, winner-take-all with uniform probability among all group members, and random full-rebate with uniform probability) provide total contributions that nearly equal total benefits, while the rest (winner-take-all with proportional probability, winner-take-all with uniform probability among contributors only, and random full-rebate with proportional probability) exceed benefits by over 30 percent. Only the proportional rebate rule is found to achieve both aggregate and individual demand revelation. Our experimental results have implications for both fundraisers and valuation practitioners.
Keywords: rebate rules; threshold public goods; voluntary contributions; experimental economics
JEL Codes: C9; C91; C92; H4; H41; Q0; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| type of rebate rule (L42) | efficiency of public good provision (H42) |
| proportional rebate rule (H23) | individual contributions (D64) |
| winner-take-all with uniform probability (C72) | lower contribution-to-induced-value ratios (J17) |
| proportional rebate rule (H23) | lower mean and median contribution-to-induced-value ratios (J17) |
| winner-take-all with proportional probability (D79) | higher contribution-to-induced-value ratios (E20) |
| random full-rebate with uniform probability (C79) | aggregate demand revelation (E00) |
| winner-take-all with proportional probability (D79) | demand overrevelation (D84) |