We compare two fixed-prize mechanisms for funding public goods, an all-pay auction and a lottery, where public good provision can only occur if the participants’ contributions equal or exceed the fixed-prize value. We show that the provisional nature of the fixed-prize means that efficiency and endowment conditions must both be satisfied to assure positive public good provision. Our main finding is that provisional fixed-prize lotteries can outperform provisional fixed-prize all-pay auctions in terms of public good provision when endowments are large relative to prize values. We test these predictions in a laboratory experiment where we vary the number of participants, the marginal per capita return (mpcr) on the public good, and the mechanism for awarding the prize, either a lottery or an all-pay auction. Consistent with the theory, we find that the mpcr matters for contribution amounts under the lottery mechanism. However, inconsistent with the theory, bids are significantly higher than predicted and there is no significant difference in the level of public good provision under either provisional, fixed-prize mechanism. We consider several different modifications to our framework that might help to explain these departures from theoretical predictions.

We provide some theory and experimental evidence on contests with entry fees. In our setup, players must simultaneously decide whether or not to pay a fee to enter a contest and the amount they wish to bid should they choose to enter the contest. In a general n-bidder game, we show that the addition of contest entry fees increases the contest designer’s expected revenue and that there is a unique revenue maximizing entry fee. In an experimental test of this theory we vary both the entry fee and the number of bidders. We find over-bidding for all entry fees and bidder group sizes, n. We also find under-participation in the contest for low entry fees and over-participation for higher entry fees. In the case of 3 bidders, the revenue maximizing entry fee for the contest designer is found to be significantly greater than the theoretically optimal entry fee. We offer some possible explanations for these departures from theoretical predictions.