Voluntary Contributions to the Establishment and Operation of Public Goods: Theory and Experimental Evidence

Yuval Arbel (), Ronen Bar-El (), Mordechai E. Schwarz () and Yossef Tobol ()
Additional contact information
Yuval Arbel: School of Business, Carmel Academic Center
Ronen Bar-El: Open University of Israel
Mordechai E. Schwarz: Open University of Israel
Yossef Tobol: Jerusalem College of Technology (JTC)

No 8532, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the dynamics of the private provision of a public good that requires both capacity buildup and ongoing operating costs. We show that setting a time limit for the collection of contributions dedicated to capacity buildup minimizes the utility loss at the Nash equilibrium. We test the theoretical model empirically by conducting contribution game experiments with religious Jewish students for the procurement of sustainable supplies for their campus synagogues and ongoing operations. The empirical findings support the model's prediction and demonstrate that the theory fairly describes the pattern of contributions when the group of contributors attributes high intrinsic value to the public good. More specifically, we find that total contributions increase over time, contributions to the capacity buildup increase with the time limit and with the number of contributors, and contributions to the capacity buildup decrease with ongoing operating costs. Additionally, we determine that gender and culture affect the pattern of contributions. We also find that individuals prefer to contribute to sustainable supplies, rather than to their ongoing operations. Our paper has practical implications for the financing of public goods through voluntary provisions.

Keywords: differential games; experiment; public goods; voluntary provision (search for similar items in EconPapers)
JEL-codes: C73 C91 C92 H41 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2014-10
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://docs.iza.org/dp8532.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp8532

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().