Enhancing fundraising with refund bonuses

Timothy N. Cason, Robertas Zubrickas

Research output: Contribution to journalArticle

7 Citations (Scopus)
25 Downloads (Pure)

Abstract

The provision point mechanism as a method of funding threshold public goods is extended with refund bonuses. Each contributor not only has his contribution refunded in the case of insufficient contributions but also receives a refund bonus proportional to his proposed contribution. As long as the refund bonus pool does not exceed the net value of the public good, in equilibrium the public good is always provided and refund bonuses are never distributed. In this paper, we empirically investigate this extension of the provision point mechanism in a laboratory experiment by testing its properties on allocative and distributive efficiency, equilibrium coordination, and invariance to information distribution. Individuals respond to the incentives induced by refund bonuses as predicted, but systematic deviations exist that are consistent with quantal response equilibrium. Since this simple mechanism has considerable practical potential especially in crowdfunding, these promising initial results call for further experimental work.
Original languageEnglish
Pages (from-to)218-233
Number of pages16
JournalGames and Economic Behavior
Volume101
Early online date28 Nov 2015
DOIs
Publication statusPublished - 1 Jan 2017

Keywords

  • public goods
  • provision point mechanism
  • refund bonus
  • crowdfunding

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