Doctoral Dissertation Research: An Experimental Investigation of the Public Goods Agency Problem

Purdue University, West Lafayette IN

Investigators

Abstract

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.