Donations as an incentive for cooperation in public good games

Identifying mechanisms to enhance cooperation in social dilemma games is one of the major challenges in the field of economics. It is typical in repeated public good games that participants cooperate to a certain degree on average and that cooperation declines over rounds. Evidence from other settings suggests that the use of charitable donations enhances prosocial behavior. In this project, we investigate whether donations can serve as incentives for a higher level of cooperation in public good games. For this purpose, we include a twenty percent donation share which is dependent on participants' contributions. Donations are either financed internally (by group members' contributions) or externally (by the experimenter). We observe that a donation incentive increases contributions significantly when donations are subsidized by the experimenter. Interestingly, donations that are internally and directly financed by group members may compensate for a lower marginal return from the public good.