Can Rank-Order Competition Resolve the Free-Rider Problem in the Voluntary Provision of Impure Public Goods? Experimental Evidence

Andrej Angelovski, Tibor Neugebauer and Maroš Servátka

No 1705, Working Papers CESARE from Dipartimento di Economia e Finanza, LUISS Guido Carli

Abstract: Publicly provided goods often create differential payoffs due to timely or spatial distances of group members. We design and test a provision mechanism which utilizes rank competition to mitigate free-riding in impure public goods. In our Rank-Order Voluntary Contribution Mechanism (Rank-Order-VCM) group members compete via observable contributions for a larger share of the public good; high contributors receive preferential access (a larger share), while low contributors receive restricted access (a lower share). In a laboratory experiment Rank-Order-VCM elicits median contributions equal to the full endowment throughout the finitely played games with constant groups. In the control treatment, with randomly assigned ranks, the contributions are significantly lower and decline over time. We thus provide evidence of rank competition, in situations where discriminatory access to public goods is possible, being efficiency enhancing.

Keywords: Competition; contest; cooperation; public goods; experiment; voluntary contribution mechanism. (search for similar items in EconPapers)
JEL-codes: C91 H41 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-cbe, nep-cdm and nep-exp
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