Raising Revenues for Charity: Auctions Versus Lotteries

Abstract

We report an experiment conducted to gain insight into factors that may affect revenues in English auctions and lotteries, two commonly used charity fund-raising formats. In particular, we examine how changes in the marginal per capita return (MPCR) from the public component of bidding, and how changes in the distribution of values affect the revenue properties of each format. Although we observe some predicted comparative static effects, the dominant result is that lottery revenues uniformly exceed English auction revenues. The similarity of lottery and English auction bids across sales formats appears to drive the excess lottery revenues.

Citation

Davis, D.D., Razzolini, L., Reilly, R.J. and Wilson, B.J. (2006), "Raising Revenues for Charity: Auctions Versus Lotteries", Isaac, R.M. and Davis, D.D. (Ed.) Experiments Investigating Fundraising and Charitable Contributors (Research in Experimental Economics, Vol. 11), Emerald Group Publishing Limited, Leeds, pp. 47-91. https://doi.org/10.1016/S0193-2306(06)11003-0