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

Published online by Cambridge University Press:  14 March 2025

Martin Kesternich ,
Andreas Lange  and
Bodo Sturm
Martin Kesternich*
Affiliation:
Centre for European Economic Research (ZEW), Mannheim, Germany
Andreas Lange*
Affiliation:
Centre for European Economic Research (ZEW), Mannheim, Germany University of Hamburg, Hamburg, Germany
Bodo Sturm*
Affiliation:
Centre for European Economic Research (ZEW), Mannheim, Germany Leipzig University of Applied Sciences, Leipzig, Germany
*
kesternich@zew.de
andreas.lange@wiso.uni-hamburg.de
bodo.sturm@htwk-leipzig.de
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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 goodsInstitutionsRule-based contribution schemesMinimum contribution rulesBurden sharingCooperationEndowment heterogeneity

JEL classification

H41: Public Goods C92: Laboratory, Group Behavior C72: Noncooperative Games
Type
Original Paper
Information
Experimental Economics , Volume 21 , Issue 1 , March 2018 , pp. 180 - 204
Copyright
Copyright © 2017 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-017-9535-2) contains supplementary material, which is available to authorized users.

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