On the performance of rule-based contribution schemes under endowment heterogeneity
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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.
KeywordsPublic goods Institutions Rule-based contribution schemes Minimum contribution rules Burden sharing Cooperation Endowment heterogeneity
JEL ClassificationC72 C92 H41
Financial support by the German Federal Ministry of Education and Research (FKZ 01UN1016A) is gratefully acknowledged. We thank the MaXLab team for their support in conducting the experiment.
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