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A Case for Bundling Public Goods Contributions

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Author Info
SUMAN GHOSH
ALEXANDER KARAIVANOV
MANDAR OAK

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Abstract

We extend the model of voluntary contributions to multiple public goods by allowing for bundling of the public goods. Specifically, we study the case where agents contribute into a common pool which is then allocated toward the financing of two pure public goods. We explore the welfare implications of allowing for such bundling vis-à-vis a separate contributions scheme. We show that for high income inequality or for identical preferences among agents bundling leads to higher joint welfare. Interestingly, a welfare improvement can in some cases occur despite a decrease in total contributions. On the contrary, when agents are heterogenous, for low income inequality bundling can lead to lower total contributions and may decrease welfare compared to a separate contribution scheme. Our findings have implications for the design of charitable institutions and international aid agencies. Copyright 2007 Blackwell Publishing, Inc..

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9779.2007.00313.x
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Publisher Info
Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 9 (2007)
Issue (Month): 3 (06)
Pages: 425-449
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Handle: RePEc:bla:jpbect:v:9:y:2007:i:3:p:425-449

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1097-3923

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  1. repec:att:wimass:1920412 is not listed on IDEAS
  2. Fang, Hanming & Norman, Peter, 2004. "An Efficiency Rationale for Bundling of Public Goods," Micro Theory Working Papers norman-04-11-21-09-39-13, Microeconomics.ca Website, revised 08 Feb 2005. [Downloadable!]
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  3. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211. [Downloadable!] (restricted)
  4. Simon Clark & Ravi Kanbur, 2004. "Stable Partnerships, Matching, and Local Public Goods," ESE Discussion Papers 82, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  5. Richard Cornes & Juni-ichi Itaya, 2004. "Models With Two Or More Public Goods," Department of Economics - Working Papers Series 896, The University of Melbourne. [Downloadable!]
  6. Bilodeau, Marc, 1992. "Voluntary contributions to united charities," Journal of Public Economics, Elsevier, vol. 48(1), pages 119-133, June. [Downloadable!] (restricted)
  7. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February. [Downloadable!] (restricted)
  8. Gradstein, Mark, 1992. "Time Dynamics and Incomplete Information in the Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 581-97, June. [Downloadable!] (restricted)
  9. Steven N. Durlauf & Marcel Fafchamps, 2004. "Social Capital," NBER Working Papers 10485, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Cornes, Richard, 1993. "Dyke Maintenance and Other Stories: Some Neglected Types of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 259-71, February. [Downloadable!] (restricted)
  11. Peter Norman & Hanming Fang, 2004. "An Efficiency Rationale for the Bundling of Public Goods," Econometric Society 2004 North American Summer Meetings 458, Econometric Society. [Downloadable!]
  12. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June. [Downloadable!] (restricted)
  13. Jeff Dayton-Johnson & Pranab Bardhan, 2002. "Inequality And Conservation On The Local Commons: A Theoretical Exercise," Economic Journal, Royal Economic Society, vol. 112(481), pages 577-602, July. [Downloadable!] (restricted)
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  14. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August. [Downloadable!] (restricted)
  15. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February. [Downloadable!] (restricted)
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  16. Bilodeau, Marc & Slivinski, Al, 1997. "Rival charities," Journal of Public Economics, Elsevier, vol. 66(3), pages 449-467, December. [Downloadable!] (restricted)
  17. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May. [Downloadable!] (restricted)
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