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

Marco Faravelli and Luca Stanca

No 127, Working Papers from University of Milano-Bicocca, Department of Economics

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

Keywords: Auctions; Public Goods; Laboratory Experiments. (search for similar items in EconPapers)
JEL-codes: C91 D44 H41 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2007-11, Revised 2007-11
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-pbe
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:mib:wpaper:127

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