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On the performance of rule-based contribution schemes under endowment heterogeneity

Martin Kesternich (), Andreas Lange () and Bodo Sturm ()
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Bodo Sturm: Centre for European Economic Research (ZEW)

Experimental Economics, 2018, vol. 21, issue 1, 180-204

Abstract: Abstract We experimentally test different rule-based contribution mechanisms in a repeated 4-player public goods game with endowment heterogeneity and compare them to a VCM, distinguishing between a random and an effort-based allocation of endowments. We find that endowment heterogeneities limit the efficiency gains from these rule-based contribution schemes under random allocation. Under effort-based allocations, substantial efficiency gains relative to a VCM occur. These are largely driven by significant reductions of contributions in VCM, while the rule-based mechanisms generate stable efficiency levels, even though falling short in realizing the maximal efficiency gains. Our results indicate that the procedure of endowment allocation impacts the perception of what constitutes a fair burden sharing.

Keywords: Public goods; Institutions; Rule-based contribution schemes; Minimum contribution rules; Burden sharing; Cooperation; Endowment heterogeneity (search for similar items in EconPapers)
JEL-codes: C72 C92 H41 (search for similar items in EconPapers)
Date: 2018
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Working Paper: On the performance of rule-based contribution schemes under endowment heterogeneity (2014) Downloads
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