Including Donors in the Provision of Public Goods

Abstract: This talk presents experimental evidence for a new experimental game capturing the strategic interaction between donors and providers of public goods. Public good providers can make decisions on investments in the public good while donors can only send transfer payments to public good providers. I organize the results around four complementary studies, analyzing different institutional arrangements: equal distribution of payments and conditionality (study 1); proportional payments, individual payments and additionality (study 2); competition among public good providers (study 3); and donations that change the public good provision technology (study 4). The results show that equal payments to all public good providers do not increase public good provision as compared to settings with no payments. Moreover, conditionality and additionality do not increase public good provision but achieve it at a lower cost to donors. Lastly, all transfer payments that link relative effort to relative payments are similarly capable of enhancing public good provision. The results thus support the importance of linking relative rewards to relative effort for those that provide the public goods in our societies.