Cost-effective giving with multiple public goods

Nathan Chan and Leonard Wolk

Journal of Economic Behavior & Organization, 2020, vol. 173, issue C, 130-145

Abstract: In this paper, we investigate how the choice environment affects contribution behavior in settings with multiple public goods. Specifically, we design a novel experiment that uses a standard voluntary contribution mechanism (VCM) game, except that subjects face multiple simultaneous VCMs, each with a different marginal per capita return (MPCR). We study two treatments—one with constrained contribution choices and one with a richer set of options—finding that the constrained choice environment yields higher payoffs. As a virtue of our design, we are able to decompose these payoff differences into two separate channels: differences in contribution levels versus differences in the cost-effectiveness of contributions. Although the first channel is typically the primary focus of public good analyses, we offer unique insights by showing that cost-effectiveness also plays an important role in shaping welfare outcomes in settings with multiple public goods. We find that cost-ineffective contributions significantly diminish payoffs in the richer choice environment—a result with important implications for modern charity and crowdfunding platforms, where donors are faced with an ever-growing number of charitable causes to consider.

Keywords: Public goods; Cost-effective contributions; VCM; Multiple public goods (search for similar items in EconPapers)
JEL-codes: C72 C90 D7 H41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:173:y:2020:i:c:p:130-145

DOI: 10.1016/j.jebo.2020.03.011

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