On the Performance of Rule-Based Contribution Schemes Under Endowment Heterogeneity

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.

Kesternich, Martin, Andreas Lange and Bodo Sturm (2018), On the Performance of Rule-Based Contribution Schemes Under Endowment Heterogeneity, Experimental Economics 21 (1) , 180-204