Cost-effective giving with multiple public goods

Abstract

In this paper, we investigate how the choice environment affects contribution behavior in settings with multiple public goods. Specifically, we design a novel experiment that uses a standard voluntary contribution mechanism (VCM) game, except that subjects face multiple simultaneous VCMs, each with a different marginal per capita return (MPCR). We study two treatments—one with constrained contribution choices and one with a richer set of options—finding that the constrained choice environment yields higher payoffs. As a virtue of our design, we are able to decompose these payoff differences into two separate channels: differences in contribution levels versus differences in the cost-effectiveness of contributions. Although the first channel is typically the primary focus of public good analyses, we offer unique insights by showing that cost-effectiveness also plays an important role in shaping welfare outcomes in settings with multiple public goods. We find that cost-ineffective contributions significantly diminish payoffs in the richer choice environment—a result with important implications for modern charity and crowdfunding platforms, where donors are faced with an ever-growing number of charitable causes to consider.