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

Tibor Neugebauer and Maroš Servátka

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: In this paper we assume that a public project creates different payoffs to different contributors. Within this environment we study two institutions: Rank Order Voluntary Contribution Mechanism (Rank-Order-VCM) and Random Order Voluntary Contribution Mechanism (Random-Order-VCM). In Rank-Order-VCM individuals compete with their observable contributions towards a public project for a larger share of the payoff that the project generates while in Random-Order-VCM the shares are assigned randomly. We observe that competition outweighs incentives to free-ride and find that Random-Rank-VCM elicits median contributions equal to the full endowment throughout the whole experiment, including the last period. In Random-Rank-VCM the contributions are significantly lower and decline over time.

Keywords: Competition; public goods; experiment; voluntary contribution mechanism (search for similar items in EconPapers)
JEL-codes: C91 H41 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2010-03-17
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:10/07

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