Enhancing Large-group Threshold Public Goods Provision by Withholding Information

Abstract

Enhancing threshold public goods provision among large groups is an important but challenging issue. The current study investigates why withholding information of provision thresholds and value distributions may enhance provision or even achieve full demand revelation in one-shot large-group public goods games. We identify the possible driving factors by eliciting individual beliefs and conditional contribution strategies under different cost-sharing rules using a controlled experiment. In particular, we compare two promising price-based cost-sharing rules with a commonly-used proportional rule in both large and small groups. Our theoretical analysis indicates that the marginal payoff penalties of contributions above the threshold remain at zero for a wide range of individual contribution levels under the price-based rules as the group size grows. Experimental results show that price-based rules increase subjects' expectations on others' contributions and that subjects use marginal-penalty dependent contribution strategies. The price-based rules therefore successfully mitigate the deterioration of contributions when group size increases. Attributed to the significantly higher expectation, the price-based uniform price cap mechanism, which collects the uniform price from everyone offering at least that price, plus the full offer of everyone offering less, outperforms all other rules in that full demand revelation is achieved at both individual and group levels.

Keywords: Threshold Public Goods, Large-Group Public Goods Provision, Cost-sharing Rule, Belief, Conditional Contribution Strategy, Experiment

JEL Classification: C72, C92, D82, H41