Using Assurance Contract to Encourage Private Provision of Ecosystem Services: Evidence from a Pilot Field Experiment

Liu, Pengfei; Swallow, Stephen K.

Using Assurance Contract to Encourage Private Provision of Ecosystem Services: Evidence from a Pilot Field Experiment

Autores

Descripción

We generalize the dominant assurance contract (Tabarrok, 1998) to the threshold public good provision. This contract offers, to donors who agree to a minimum price, an assurance payment as compensation in the event that fundraising fails to achieve the threshold needed to fund the good. We analyze the outcomes when individuals face 1) a minimum price for eligibility for the assurance payment and 2) an assurance payment that differs from the suggested price. We report a field experiment to fund bird habitat in Rhode Island, USA. An increase of assurance payment does not necessarily increase donations; however, for online donation data, we find positive evidence that the assurance payment can increase donation probability. Assurance payments could potentially improve fundraising success and the private provision of public goods.