Cost Sharing in a Volunteer's Dilemma

Abstract

Many interesting situations of public good provision such as a bystander's decision to help a victim, a committee member's decision to veto, or a company's decision to develop innovative products can be described by the volunteer's dilemma (VOD). The authors analyze a variant of the VOD in which the costs of producing a public good are shared equally among the volunteers rather than paid in full by each of the volunteers. The game theoretic solution predicts that the probability of volunteering is larger under the condition of sharing than when each volunteer pays the full cost. It is predicted that, even when cost sharing, the individual probability to volunteer decreases with group size, and larger groups still underproduce the public good. Predictions are tested using data collected via a mailed questionnaire to students of Berne University. The quantitative predictions of the game-theoretic models do not describe the data well, even when the models are extended with risk preferences. However, the less informative qualitative prediction that cost sharing increases the individual probability to volunteer is supported by the data.

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