Incentivizing provision of collective goods: Allocation rules

Abstract

Abstract In a laboratory experiment, we study the voluntary provision of a divisible collective good. Allocations of the collective good to group members are determined by a third party “allocator” who benefits from increased provision of the collective good, but is rewarded externally. The allocator may resolve the free‐rider problem inherent in provision by assigning shares of the collective good to incentivize cooperation. The flexibility in allocations available to the allocator is varied across three treatment conditions. The highest level of collective good provision is observed within some groups in the mechanism that allows the allocator the greatest flexibility. However, greater flexibility comes at the cost of higher variance in allocation decisions by some allocators, leading to lower levels of provision in some groups.

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