Relative performance of two simple incentive mechanisms in a public goods experiment

We compare the performance of two incentive mechanisms in public goods experiments. One mechanism, the Falkinger mechanism, rewards and penalizes agents for deviations from the average contributions to the public good (Falkinger mechanism). The other, the compensation mecha- nism, allows agents to subsidize the other agents. contributions (compen- sation mechanism). It is found that both mechanisms lead to an increase in the level of contributions to the public goods. However, the Falkinger mechanism predicts the average level of contributions more reliably than the compensation mechanism.