This study reports the effects of rebate rules on voluntary contributions to a threshold public good. Rebate rules specify how excess contributions, over the threshold amount are distributed. We examine three rebate rules experimentally: a no rebate policy where excess contributions are discarded, a proportional rebate policy where excess contributions are rebated proportionally to an individual's contribution, and a utilization rebate policy where excess contributions provide some continuous public good. Significantly more Nash equilibrium outcomes are observed under the no rebate treatment than under either of the other two. Interestingly, the variance of contributions differs significantly between rebate treatments.
KeywordsThreshold, public good, rebates, experiment This study reports the effects of rebate rules on voluntary contributions to a threshold public good. Rebate rules specify how excess contributions, over the threshold amount required to provide the public good, are distributed. We examine three rebate rules experimentally: a no rebate policy where excess contributions are discarded, a proportional rebate policy where excess contributions are rebated proportionally to individual's contributions, and a utilization rebate policy where excess contributions provide some continuous public good. Significantly more Nash equilibrium outcomes are observed under the no rebate treatment than under either of the other two. Interestingly, the variance of contributions is significantly different between the three treatments; highest under the utilization rebate policy and lowest under the no rebate policy. JEL Classification Code: C72, H41