Using tontines to finance public goods: back to the future?
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| Main Authors: | , , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Cambridge, Mass.
National Bureau of Economic Research
2004
|
| Series: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
10958 |
| Subjects: | |
| Links: | http://papers.nber.org/papers/w10958.pdf |
| Abstract: | "The tontine, which is an interesting mixture of group annuity, group life insurance, and lottery, has a peculiar place in economic history. In the seventeenth and eighteenth centuries it played a major role in raising funds to finance public goods in Europe, but today it is rarely encountered outside of murder mysteries. This study provides a formal model of individual contribution decisions under a tontine mechanism. We analyze the performance of tontines and compare them to another popular fundraising scheme used today by both government and charitable fundraisers: lotteries. Our major theoretical results are that (i) the optimal tontine for agents with identical valuations of the public good consists of all agents receiving a fixed "prize" amount in the first period equal to a percentage of their total contribution, (ii) contribution levels in the optimal tontine are identical to those of risk-neutral agents in an equivalently valued single prize lottery, (iii) contribution levels for the optimal tontine are independent of risk-aversion, and thereby outperform lotteries when agents are risk-averse, (iv) if agents are sufficiently asymmetric in their valuation of the public good, equilibrium contribution levels are larger under tontines than any lottery. In particular, one can obtain full participation in the tontine mechanism compared to only partial participation in a lottery. These insights highlight that the tontine institution can be a useful tool for fundraisers in the future"--National Bureau of Economic Research web site. |
| Physical Description: | 22 S. |
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| 520 | 3 | |a "The tontine, which is an interesting mixture of group annuity, group life insurance, and lottery, has a peculiar place in economic history. In the seventeenth and eighteenth centuries it played a major role in raising funds to finance public goods in Europe, but today it is rarely encountered outside of murder mysteries. This study provides a formal model of individual contribution decisions under a tontine mechanism. We analyze the performance of tontines and compare them to another popular fundraising scheme used today by both government and charitable fundraisers: lotteries. Our major theoretical results are that (i) the optimal tontine for agents with identical valuations of the public good consists of all agents receiving a fixed "prize" amount in the first period equal to a percentage of their total contribution, (ii) contribution levels in the optimal tontine are identical to those of risk-neutral agents in an equivalently valued single prize lottery, (iii) contribution levels for the optimal tontine are independent of risk-aversion, and thereby outperform lotteries when agents are risk-averse, (iv) if agents are sufficiently asymmetric in their valuation of the public good, equilibrium contribution levels are larger under tontines than any lottery. In particular, one can obtain full participation in the tontine mechanism compared to only partial participation in a lottery. These insights highlight that the tontine institution can be a useful tool for fundraisers in the future"--National Bureau of Economic Research web site. | |
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| illustrated | Not Illustrated |
| indexdate | 2024-12-20T13:23:15Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-016906484 |
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| physical | 22 S. |
| publishDate | 2004 |
| publishDateSearch | 2004 |
| publishDateSort | 2004 |
| publisher | National Bureau of Economic Research |
| record_format | marc |
| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Lange, Andreas 1972- Verfasser (DE-588)122457358 aut Using tontines to finance public goods back to the future? Andreas Lange ; John A. List ; Michael K. Price Cambridge, Mass. National Bureau of Economic Research 2004 22 S. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 10958 "The tontine, which is an interesting mixture of group annuity, group life insurance, and lottery, has a peculiar place in economic history. In the seventeenth and eighteenth centuries it played a major role in raising funds to finance public goods in Europe, but today it is rarely encountered outside of murder mysteries. This study provides a formal model of individual contribution decisions under a tontine mechanism. We analyze the performance of tontines and compare them to another popular fundraising scheme used today by both government and charitable fundraisers: lotteries. Our major theoretical results are that (i) the optimal tontine for agents with identical valuations of the public good consists of all agents receiving a fixed "prize" amount in the first period equal to a percentage of their total contribution, (ii) contribution levels in the optimal tontine are identical to those of risk-neutral agents in an equivalently valued single prize lottery, (iii) contribution levels for the optimal tontine are independent of risk-aversion, and thereby outperform lotteries when agents are risk-averse, (iv) if agents are sufficiently asymmetric in their valuation of the public good, equilibrium contribution levels are larger under tontines than any lottery. In particular, one can obtain full participation in the tontine mechanism compared to only partial participation in a lottery. These insights highlight that the tontine institution can be a useful tool for fundraisers in the future"--National Bureau of Economic Research web site. Finanzwirtschaft Finance, Public List, John A. 1968- Verfasser (DE-588)124330827 aut Price, Michael Keith Verfasser (DE-588)129468304 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 10958 (DE-604)BV002801238 10958 http://papers.nber.org/papers/w10958.pdf kostenfrei Volltext |
| spellingShingle | Lange, Andreas 1972- List, John A. 1968- Price, Michael Keith Using tontines to finance public goods back to the future? National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Finanzwirtschaft Finance, Public |
| title | Using tontines to finance public goods back to the future? |
| title_auth | Using tontines to finance public goods back to the future? |
| title_exact_search | Using tontines to finance public goods back to the future? |
| title_full | Using tontines to finance public goods back to the future? Andreas Lange ; John A. List ; Michael K. Price |
| title_fullStr | Using tontines to finance public goods back to the future? Andreas Lange ; John A. List ; Michael K. Price |
| title_full_unstemmed | Using tontines to finance public goods back to the future? Andreas Lange ; John A. List ; Michael K. Price |
| title_short | Using tontines to finance public goods |
| title_sort | using tontines to finance public goods back to the future |
| title_sub | back to the future? |
| topic | Finanzwirtschaft Finance, Public |
| topic_facet | Finanzwirtschaft Finance, Public |
| url | http://papers.nber.org/papers/w10958.pdf |
| volume_link | (DE-604)BV002801238 |
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