This award funds a doctoral dissertation that will examine how people make contributions to public goods when they know that a manager will decide how their contributions are used to benefit others. Previous research in behavioral economics has used lab experiments to determine what factors encourage individuals to contribute to efforts that provide public goods. In this previous research, the experimental design meant that all individuals were certain that their contributions would go directly to funding public goods. However, in many real world situations, charity managers must make decisions about how to use contributions. In this environment, charitable contributors may be concerned that their donations will not be used to benefit others directly. In economic terms, the manager is acting as an agent for the contributors, and there is a chance that this agency relationship will result in inefficient outcomes.
The coPI will conduct four sets of experiments designed to test hypotheses about how the agency relationship will affect voluntary contributions and public goods provision. The first study investigates the effects of agency in the widely-used voluntary contributions mechanism (VCM). The second study considers the rule of information disclosure and competition between charities for contributions on the effects of agency. The third study investigates whether donors have a preferred level of uncooperative behavior and if this preferred level is related to the nature of the uncooperative action. Finally, the fourth study employs a provision point mechanism (PPM); this allows for a test of the impact of agency in two different contribution mechanisms.
The research will employ undergraduate students and will have practical implications for the management of charities and other nonprofit enterprises that rely on contributions.
This grant has funded two research studies that aim to expand the understanding of the public goods game, which is one of the most commonly studied games in experimental economics. The project sought to expand the understanding of the game by adding important features that are commonly observed in the field. Once these features were added, the central question was whether the results were consistent with behavior commonly observed in the public goods game. The public goods game captures the problem of a group of self-interested individuals attempting to fund a public good, where the individuals have the incentive to free-ride on the contributions of others. Experiment participants are given an endowment of tokens that they can keep for themselves or they can contribute to a group account. A token kept for themselves is worth one experimental dollar to themselves and zero to the other participants. A token contributed to the group account is worth 0.6 to each group member. This results in a classic social dilemma problem, because the group is better off if each individual contributes tokens to the group account but the individual is better off if they keep the tokens for themselves. The first study funded by the grant investigated what happens when a potentially opportunistic individual (the manager) is put in charge of the group account. The individual in charge of the group account can use group contributions for his own gain. This study was motivated by the impact executive behavior has had on contribution levels to non-profit organizations. In several instances, when fraudulent behavior of the manager was revealed to donors, contributions were significantly reduced. Overall, the presence of the manager had a strong, negative impact on contribution levels and the impact was most pronounced in end periods. This result was investigated further by considering whether financial incentives or the observability of actions, impacted the effect the manager had on group contributions. When managers had lower financial incentives to take from the group account, managers took less and others in the group contributed more. The observability of the manager’s actions had a similar impact. When the others in the group could monitor the manager, they contributed more and the manager took less. The second study investigated how playing in two public goods game, simultaneously, impacted contributions. The two games differed in various ways. One game was a standard public goods game, while in the other game contributions were incentivized in some way. Contributions were incentivized with a higher monetary award, the ability to express approval/disapproval for the contributions of others or with the removal of anonymity. Each of these three incentive systems has been shown to increase contributions in a single game setting. The findings from this study showed that only monetary rewards remained effective in a two game setting.
