SPI Working Paper Series

WP #: 021

Date: Dec 2014

Other Sources


Using Lotteries To Finance Public Goods: Theory And Experimental Evidence

     This paper was published in International Economic Review in 2007

    John List

    University of Chicago, NBER

This study explores the economics of charitable fund-raising. We begin by developing theory that examines the optimal lottery design while explicitly relaxing both risk-neutrality and preference homogeneity assumptions. We test our theory using a battery of experimental treatments and find that our theoretical predictions are largely confirmed. Specifically, we find that single- and multiple-prize lotteries dominate the voluntary contribution mechanism both in total dollars raised and the number of contributors attracted. Moreover, we find that the optimal fund-raising mechanism depends critically on the risk postures of potential contributors and preference heterogeneity.