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Competition among public good providers for donor rewards

Published online by Cambridge University Press:  14 March 2025

Natalie Struwe ,
Esther Blanco  and
James M. Walker
Natalie Struwe
Affiliation:
Department of Public Finance, University of Innsbruck, Universitaetsstrasse 15, 6020 Innsbruck, Austria
Esther Blanco
Affiliation:
Department of Public Finance, University of Innsbruck, Universitaetsstrasse 15, 6020 Innsbruck, Austria The Ostrom Workshop, Indiana University, Bloomington, USA
James M. Walker*
Affiliation:
The Ostrom Workshop, Indiana University, Bloomington, USA Department of Economics, Indiana University, Wylie Hall 105, 47405 Bloomington, IN, USA
*
[email protected]
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Abstract

We present experimental evidence for decision settings where public good providers compete for endogenous rewards which are donations (transfers) offered by outside donors. Donors receive benefits from public good provision but cannot provide the good themselves. The performance of three competition mechanisms is examined in relation to the level of public good provision and transfers offered by donors. In addition to a contest where transfers received by public good providers are proportional to effort, we study two contests with exclusion from transfers, namely a winner-takes-all and a loser-gets-nothing. We compare behavior in these three decision settings to the default setting of no-contest (no-transfers). Results for this novel decision environment with endogenous transfers show that donors offer transfers (contest prizes) at similar levels across contests and contributions to the public good are not significantly different in the three contests settings, but are consistently and significantly higher in all contests compared to the setting with no-transfers. Initially, the winner-takes-all setting leads to a significantly higher increase in public good contributions compared to the other two contests; but this difference diminishes across decision rounds.

Keywords

Public goodInstitutionExternalityContestsLaboratory experiment

JEL classification

H41: Public Goods D70: General C92: Laboratory, Group Behavior
Type
Original Paper
Information
Experimental Economics , Volume 27 , Issue 1: Special Issue in Honor of John H. Kagel , March 2024 , pp. 215 - 243
Copyright
Copyright © The Author(s), under exclusive licence to Economic Science Association 2022

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