Editing Public good (section)

=== Assurance contracts ===

First proposed by Bagnoli and Lipman,<ref>{{Cite journal|last1=Bagnoli|first1=Mark|last2=Lipman|first2=Barton|date=1989|title=Provision of Public Goods: Fully Implementing the Core through Private Contributions|url=https://www.jstor.org/stable/2297502|journal=The Review of Economic Studies |volume=56|issue=4|pages=583–601|doi=10.2307/2297502|jstor=2297502 |hdl=2027.42/100743 |hdl-access=free}}</ref> In 1989, [[assurance contracts]] have each funder agree to spend a certain amount towards a public good conditional on the total funding being sufficient to produce the good. If not everyone agrees to the terms, then no money is spent on the project. Donors can feel assured that their money will only be spent if there is sufficient support for the public good. Assurance contracts work particularly well with smaller groups of easily identifiable participants, especially when the game can be repeated.

Several crowdfunding platforms such as [[Kickstarter]] and [[IndieGoGo]] have used assurance contracts to support various projects (though not all of them are public goods). Assurance contracts can be used for non-monetary coordination as well, for example, Free State Project obtained mutual commitments for 20,000 individuals to move to New Hampshire in a bid to influence the politics of the state.
Alex Tabarrok suggested a modification called dominant [[assurance contracts]] where the mechanism designer gives every contributor a refund bonus if the contract fails. {{fact|date=February 2025}} For example, in addition to returning their contributions, the mechanism designer might give all contributors an additional $5 if the total donations are not sufficient to support the project. If there is a chance that the contract will fail, a refund bonus incentivizes people to participate in the mechanism, making the all-pay equilibrium more likely. This comes with the drawback that the mechanism designer must pay the participants in some cases (e.g. when the contract fails), which is a common theme.

Zubrickas <ref>{{Cite journal|last1=Zubrickas|first1=Robertas|date=2014|title=The provision point mechanism with refund bonuses|url=https://www.sciencedirect.com/science/article/abs/pii/S0047272714002205|journal=Journal of Public Economics|language=en|volume=120|pages=231–234|doi=10.1016/j.jpubeco.2014.10.006}}</ref> proposed a simple modification of dominant assurance contracts where people are given a refund bonus proportional to the amount they offered to donate, this incentivizes larger contributions than the fixed refund from Tabarrok’s original proposal. There have been many variations on the idea of conditional donations towards a public good. For example, the Conditional Contributions Mechanism <ref>{{Cite journal|last1=Reischmann|first1=Andreas|date=2015|title=The Conditional Contribution Mechanism for the Provision of Public Goods|url=https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2019.3337|journal=Discussion Paper Series No. 586|volume=65 |issue=11 |pages=5171–5187 |language=en|doi=10.11588/heidok.00018483}}</ref> allows donors to make variable sized commitments to fund the project conditional on the total amount committed. Similarly, the Binary Conditional Contributions Mechanism <ref>{{Cite journal|last1=Reischmann|first1=Andreas|last2=Oechssler|first2=Joerg|date=2018|title=The Binary Conditional Contribution Mechanism for public good provision in dynamic settings — Theory and experimental evidence|url=https://www.sciencedirect.com/science/article/abs/pii/S0047272718300355|journal=Journal of Public Economics|language=en|volume=159|pages=104–115|doi=10.1016/j.jpubeco.2018.02.009}}</ref> allows users to condition their donation on the number of unique funders. Extensions such as the Street Performer Protocol consider time-limited spending commitments.