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RANK‐ORDER COMPETITION IN THE VOLUNTARY PROVISION OF IMPURE PUBLIC GOODS
Author(s) -
Angelovski Andrej,
Neugebauer Tibor,
Servátka Maroš
Publication year - 2019
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12797
Subject(s) - public good , competition (biology) , endowment , order (exchange) , rank (graph theory) , economics , microeconomics , free riding , differential (mechanical device) , public economics , incentive , political science , mathematics , engineering , finance , ecology , combinatorics , law , biology , aerospace engineering
Publicly provided goods often create differential payoffs due to timely or spatial distances of group members. We design and test a provision mechanism which utilizes rank competition to mitigate free‐riding in impure public goods. In our Rank‐Order Voluntary Contribution Mechanism (Rank‐Order‐VCM) group members compete via observable contributions for a larger share of the public good; high contributors receive preferential access (a larger share), while low contributors receive restricted access (a lower share). In a laboratory experiment, Rank‐Order‐VCM elicits median contributions equal to the full endowment throughout the finitely played games with constant groups. In the control treatment, with randomly assigned ranks, the contributions are significantly lower and decline over time. We thus provide evidence of rank competition, in situations where discriminatory access to public goods is possible, being efficiency enhancing. ( JEL C91, H41)