Relative Framing of Public Good Contributions with Varying Endowment Distribution

Abstract

Abstract: Individual contributions to public goods can be framed as absolute amounts or as relative proportions of income. This paper examines the effect of such framing on contributions of group members to a public good in a laboratory experiment. Group members have high and low amounts of endowed funds available to contribute to the public good and the number of high-endowment members in each group varies between treatments. All participants play the public good game without and with minimum contribution level (MCL). We express the contribution metric and MCLs either as an absolute amount or as a relative proportion of a group member’s available endowment. The results of the experiment are consistent with our hypotheses that these institutional designs affect contribution behavior through shifting reference points of the members’ decisions. First, high-endowment members tend to contribute a lower proportion of their available funds compared with the low-endowment members. Second, average contribution in a group increases with the number of high-endowment members in the group. Third, the relative framing significantly reduces average contribution level, mainly because it reduces the probability that some members contribute all of their available funds. Fourth, the difference in average contributions between absolute and relative conditions mostly disappears when MCL is introduced.