Uncertain Returns in Threshold Public Goods: An Experimental Investigation

Abstract

For a variety of public goods projects, the exact return from provision is not known. We design an experiment to test the impact of an uncertain return on voluntary contributions. An uncertain return may be caused by either nature (the benefits of building a dyke depend on the frequency and intensity of floods) or third-party action (the effort exerted by the project manager affects the quality of the dyke). We find that the key determinant of contributions is a positive relationship with the expected return. An uncertain return, either caused by nature or third-party action, does not reduce contributions in our setting. We also find that the mechanism of voluntary provision is well suited for high value projects.