Single versus multiple-prize all-pay auctions to finance public goods: An experimental analysis

This paper presents an experimental comparison of single and multiple-prize all-pay auctions as fundraising mechanisms to finance public goods. We consider a setting characterized by heterogenous incomes and incomplete information, where single and multiple-prize incentive mechanisms are predicted to raise the same overall contribution, but different contributions by income level. We find that overall, for a given total prize sum, a single large prize generates higher contributions to the public good than three smaller prizes. As predicted by the theory, a single prize provides a more effective incentive for high-income individuals. However, contrary to the theoretical predictions, multiple prizes do not provide a more effective incentive for low-income individuals.

► We study all-pay auctions as incentive mechanisms to finance public goods. ► We compare experimentally the effects of single versus multiple prizes. ► Overall, a single prize is found to be more effective than multiple prizes. ► A single prize is a more effective incentive for high-income individuals. ► Multiple prizes are not a more effective incentive for low-income individuals.