Framing effects in public goods: Prospect Theory and experimental evidence

Abstract: This paper studies, both theoretically and experimentally, framing effects in the context of a public good game in which players have to make a costly contribution either (i) to achieve or (ii) not to lose a non-excludable monetary prize. Our protocol leads to public good provision (not deterioration) only if a certain contribution level is achieved. Since both frames differ with respect to the reference point, we apply Prospect Theory to derive testable predictions. In particular, Prospect Theory predicts—and our experimental evidence confirms—greater contribution in the “loss” (“gain”) frame when the contribution threshold is high (low). We also estimate the parameters which better suit our experimental evidence and partly confirm previous results in the literature. [Copyright &y& Elsevier]