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

62 Pages Posted: 25 Oct 2014

See all articles by Yuval Arbel

Yuval Arbel

Technion-Israel Institute of Technology - Faculty of Architecture and Town Planning

Ronen Bar-El

Open University of Israel

Mordechai E. Schwarz

The Open University of Israel

Yossef Tobol

The Jerusalem College of Technology; The Carmel Academic Center

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

JEL Classification: C73, C91, C92, H41

Suggested Citation

Arbel, Yuval and Bar-El, Ronen and Schwarz, Mordechai E. and Tobol, Yossef, Voluntary Contributions to the Establishment and Operation of Public Goods: Theory and Experimental Evidence. IZA Discussion Paper No. 8532, Available at SSRN: https://ssrn.com/abstract=2514705 or http://dx.doi.org/10.2139/ssrn.2514705

Yuval Arbel (Contact Author)

Technion-Israel Institute of Technology - Faculty of Architecture and Town Planning ( email )

Technion City
Haifa 32000
Israel

Ronen Bar-El

Open University of Israel ( email )

Mordechai E. Schwarz

The Open University of Israel ( email )

1 University Road
Ra'anana, 4353701
Israel

Yossef Tobol

The Jerusalem College of Technology ( email )

Jerusalem
Israel

HOME PAGE: http://www.jct.ac.il/he/tobol

The Carmel Academic Center ( email )

Haifa
Israel

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