Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 654: Is there a hidden cost of imposing a minimum contribution level for public good contributions?

Martin G. Kocher (), Peter Martinsson (), Emil Persson () and Xianghong Wang
Additional contact information
Martin G. Kocher: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: PO Box 640, SE 40530 GÖTEBORG, Sweden
Peter Martinsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O.Box 640, SE 40530 GÖTEBORG, Sweden
Emil Persson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O Box 640, SE 40530 GÖTEBORG, Sweden
Xianghong Wang: School of Economics, Renmin University of China, Postal: Department of Economics., School of Business, Economics and Law, Göteborg University, Box 640, SE 40530 GÖTEBORG

Abstract: We examine the effects of either exogenously imposing or endogenously letting subjects choose whether to impose minimum contribution levels (MCLs) in a linear public goods experiment using the strategy method. Our results on contribution levels to the public goods are fairly independent of how MCLs are imposed. We find that the main effect of an MCL on unconditional contributions is that it increases low contribution levels to the MCL imposed, while the effect of those contributing more than the MCL before its introduction depends on the size of the MCL. Unexpectedly, there is much more crowding out for a low MCL than for a relatively high MCL. However, the distribution of contribution types is stable across different MCLs.

Keywords: Cooperation; China; experiment; minimum level; public good

JEL-codes: C91; D03; D64

22 pages, April 5, 2016

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